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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 1934.   
|          
|           |  | For the fiscal Year Ended December 31, 2005                                                 
|          
|or        
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For 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
    incorporation or organization)                          |  | (I.R.S. Employer
    Identification No.)
|                                                                                           
|3445 Peachtree Road N.E., Suite 700
    Atlanta, GA(Address of principal executive offices) |  | 30326(Zip Code)                         

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 Registered
|                                       |  |                                          
|Common Stock, $.01 par value per share |  | American Stock Exchange                  

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


Title of Each Class









o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


|                           |                      |                         
|-------------------------- | -------------------- | ------------------------
|Large accelerated filer  o | Accelerated filer  þ | Non-accelerated filer  o

o þ




þ o




DOCUMENTS INCORPORATED BY REFERENCE


10-K.










---



##### 










LODGIAN, INC.


Form 10-K


For the Year Ended December 31, 2005


TABLE OF CONTENTS


|                                                   |  |                                                                                                                      |    |      |    | 
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                   |  |                                                                                                                      |    | Page |   
|                                                   |  |                                                                                                                      |    |      |   
|PART I.                                           
|Item 1.                                            |  | Business                                                                                                             |    |      | 1  | 
|Item 1A.                                           |  | Risk Factors                                                                                                         |    |      | 20 | 
|Item 1B.                                           |  | Unresolved Staff Comments                                                                                            |    |      | 32 | 
|Item 2.                                            |  | Properties                                                                                                           |    |      | 32 | 
|Item 3.                                            |  | Legal Proceedings                                                                                                    |    |      | 32 | 
|Item 4.                                            |  | Submission of Matters to a Vote of Security
    Holders                                                              |    |      | 32 | 
|                                                  
|PART II.                                          
|Item 5.                                            |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 33 | 
|Item 6.                                            |  | Selected Financial Data                                                                                              |    |      | 35 | 
|Item 7.                                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operation                             |    |      | 37 | 
|Item 7A.                                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |    |      | 70 | 
|Item 8.                                            |  | Financial Statements and Supplementary
    Data                                                                      |    |      | 71 | 
|Item 9.                                            |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |    |      | 71 | 
|Item 9A.                                           |  | Controls and Procedures                                                                                              |    |      | 71 | 
|                                                  
|PART III.                                         
|Item 10.                                           |  | Directors and Executive Officers of the
    Registrant                                                               |    |      | 77 | 
|Item 11.                                           |  | Executive Compensation                                                                                               |    |      | 77 | 
|Item 12.                                           |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |    |      | 77 | 
|Item 13.                                           |  | Certain Relationships and Related
    Transactions                                                                   |    |      | 77 | 
|Item 14.                                           |  | Principal Accounting Fees and Services                                                                               |    |      | 77 | 
|                                                  
|PART IV.                                          
|Item 15.                                           |  | Exhibits, Financial Statement Schedules                                                                              |    |      | 77 | 
|Signatures                                         |  |                                                                                                                      | 76 |     
|EX-14 LODGIAN'S POLICY ON BUSINESS ETHICS         
|EX-21. LODGIAN'S LIST OF SUBSIDIARIES             
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO      
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO      
|EX-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






| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | 71 hotels that we wholly own and operate through
    subsidiaries; and                                                   
|
| |  | four hotels that we operate in joint ventures in which we have a
    50% or greater equity interest and exercise control.





Our Operations


day-to




1



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Corporate History










2



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Franchise Affiliations








|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        |  |    |    |  |  |       |       | 
|--------------------------------------- | ----------------------------- | ---------- | -- | -- | ------------ |  | ----- | ------ |  |  | ------ | - |  | ------ | --- | --- | ------ |  | -- | -- |  |  | ----- | ----- | 
|                                        |                               | Continuing |    |    | Discontinued |  |       |       
|                                        |                               | Operations |    |    | Operations   |  |       | Total  | 
|                                        |                               |            |    |    |              |  |       |        | 
|                                        |                               | No. of     |    |    | No. of       |  |       | No. of |  |  | No. of |   |  | No. of |     |     | No. of | 
|                                        |                               | Hotels     |    |    | Rooms        |  |       | Hotels |  |  | Rooms  |   |  | Hotels |     |     | Rooms  | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        | 
|InterContinental Hotels Group PLC (IHG) |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        |  |    |    |  |  |       |      
|                                        | Holiday Inn                   |            |    | 27 |              |  |       | 4,750  |  |  |        | 3 |  |        |     | 514 |        |  |    | 30 |  |  |       | 5,264 | 
|                                        | Holiday Inn Express           |            |    | 3  |              |  |       | 363    |  |  |        |  |  |        |     |    |        |  |    | 3  |  |  |       | 363   | 
|                                        | Holiday Inn Select            |            |    | 3  |              |  |       | 798    |  |  |        |  |  |        |     |    |        |  |    | 3  |  |  |       | 798   | 
|                                        | Crowne Plaza                  |            |    | 9  |              |  |       | 2,429  |  |  |        | 1 |  |        |     | 275 |        |  |    | 10 |  |  |       | 2,704 | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        | 
|Total IHG                               |                               |            | 42 |    |              |  | 8,340 |        |  |  | 4      |   |  |        | 789 |     |        |  | 46 |    |  |  | 9,129 |      
|                                       
|Marriott International, Inc.            |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        |  |    |    |  |  |       |      
|                                        | Marriott                      |            |    | 1  |              |  |       | 238    |  |  |        |  |  |        |     |    |        |  |    | 1  |  |  |       | 238   | 
|                                        | Courtyard by Marriott         |            |    | 7  |              |  |       | 760    |  |  |        |  |  |        |     |    |        |  |    | 7  |  |  |       | 760   | 
|                                        | Fairfield Inn by Marriott     |            |    | 2  |              |  |       | 233    |  |  |        | 3 |  |        |     | 330 |        |  |    | 5  |  |  |       | 563   | 
|                                        | Residence Inn by Marriott     |            |    | 2  |              |  |       | 177    |  |  |        |  |  |        |     |    |        |  |    | 2  |  |  |       | 177   | 
|                                        | SpringHill Suites by Marriott |            |    | 1  |              |  |       | 107    |  |  |        |  |  |        |     |    |        |  |    | 1  |  |  |       | 107   | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        | 
|Total Marriott International            |                               |            | 13 |    |              |  | 1,515 |        |  |  | 3      |   |  |        | 330 |     |        |  | 16 |    |  |  | 1,845 |      
|                                       
|Hilton Hotels Corporation               |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        |  |    |    |  |  |       |      
|                                        | Hilton                        |            |    | 3  |              |  |       | 587    |  |  |        |  |  |        |     |    |        |  |    | 3  |  |  |       | 587   | 
|                                        | DoubleTree Club               |            |    | 1  |              |  |       | 190    |  |  |        |  |  |        |     |    |        |  |    | 1  |  |  |       | 190   | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        | 
|Total Hilton Hotels                     |                               |            | 4  |    |              |  | 777   |        |  |  |       |   |  |        |    |     |        |  | 4  |    |  |  | 777   |      
|                                       
|Choice Hotels International, Inc.       |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        |  |    |    |  |  |       |      
|                                        | Clarion                       |            |    | 2  |              |  |       | 590    |  |  |        |  |  |        |     |    |        |  |    | 2  |  |  |       | 590   | 
|                                        | Quality Total Choice Hotels   |            |    | 1  |              |  |       | 102    |  |  |        | 1 |  |        |     | 205 |        |  |    | 2  |  |  |       | 307   | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |     |     |        | 
|Total Choice Hotels                     |                               |            | 3  |    |              |  | 692   |        |  |  | 1      |   |  |        | 205 |     |        |  | 4  |    |  |  | 897   |      

3



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|                        |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        |  |   |   |    |  |     |     |        | 
|----------------------- | -------- | ---------------- | - | - | ------------ |  | --- | ------ | ------ |  | ------ | - | - | ------ | - | - | ------ |  | - | - | -- |  | --- | --- | ------ | 
|                        |          | Continuing       |   |   | Discontinued |  |     |       
|                        |          | Operations       |   |   | Operations   |  |     | Total  |       
|                        |          |                  |   |   |              |  |     |        |       
|                        |          | No. of           |   |   | No. of       |  |     | No. of |        |  | No. of |   |   | No. of |   |   | No. of | 
|                        |          | Hotels           |   |   | Rooms        |  |     | Hotels |        |  | Rooms  |   |   | Hotels |   |   | Rooms  | 
|                        |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        | 
|                       
|Carlson Companies       |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        |  |   |   |    |  |     |    
|                        | Radisson |                  |   | 2 |              |  |     | 403    |        |  |        |  |   |        |   |  |        |  |   | 2 |    |  |     | 403 |       
|                        | Park Inn |                  |   | 1 |              |  |     | 126    |        |  |        |  |   |        |   |  |        |  |   | 1 |    |  |     | 126 |       
|                        |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        | 
|Total Carlson Companies |          |                  | 3 |   |              |  | 529 |        |        |  |       |   |   |        |  |   |        |  | 3 |   |    |  | 529 |    
|Non-franchised hotels   |          |                  | 2 |   |              |  | 291 |        |        |  |       |   |   |        |  |   |        |  | 2 |   |    |  | 291 |    
|                        |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        | 
|                        |          | Total All Hotels |   |   | 67           |  |     |        | 12,144 |  |        |   | 8 |        |   |   | 1,324  |  |   |   | 75 |  |     |     | 13,468 | 
|                        |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        | 











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Six hotels are held for sale. Two of these hotels are in default
    of their respective franchise agreement for failure to complete
    their Property Improvement Plan (PIP). Four
    additional hotels are in default or in non-compliance of their
    respective franchise agreements for not maintaining required
    guest satisfaction scores. Each of these hotels requires a
    significant capital investment for which we do not anticipate a
    sufficient return on our investment. We have entered into a
    forbearance agreement with the franchisor regarding one of these
    hotels that is in default which will maintain the flag until the
    earlier of March 31, 2006 or until we sell the hotel. We
    plan to enter into a voluntary termination agreement with the
    franchisor regarding two of these hotels which will maintain the
    flag until the earlier of June 30, 2006 or until we sell
    the hotels.
|
| |  | One hotel was held for sale but was reclassified into continuing
    operations in the fourth quarter 2005 as management no longer
    expected to have the hotel sold within one year due to issues
    related to the transfer of the ground lease to a prospective
    buyer. This hotel is in default of its franchise agreement for
    not maintaining required guest satisfaction scores and has a
    license termination date of February 14, 2006. We may be
    subject to liquidated damages. We have entered into a letter of
    intent to sell this hotel to a joint venture in which we will be
    a minority owner. However, we will no longer continue to operate
    the hotel.                                                                                                                                                                                                                                                     
|
| |  | One hotel has received an extension to its default termination
    date until August 15, 2006. The franchisor has verbally
    agreed to our planned renovations of two floors of guestrooms
    and guestroom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

4



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | corridors. This work began on January 9, 2006 and will take
    approximately 90 days to complete. We anticipate the
    renovations will assist us in improving the quest product scores.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Seven hotels are in default or non-compliance of their
    respective franchise agreement because of substandard guest
    satisfaction or quality scores. Three of these hotels are
    trending above the required thresholds, however, they must
    remain above that threshold for two consecutive years to earn a
    clean slate letter. We anticipate these three hotels
    will earn their clean slate letters in August 2006,
    August 2007 and February 2008, respectively. Two of these hotels
    are awaiting follow-up
    quality inspections by the franchisor to cure the non-compliance
    issues. Two of these hotels have entered into the non-compliance
    status due to a new measurement process implemented in January
    2006 by the franchisor. One of these hotels in non-compliance
    recently received an up-branding renovation. The scores used to
    determine this non-compliance were done before the
    pre-renovation and we anticipate curing this non-compliance as
    the new scores begin to cycle in. Our corporate operations team,
    as well as each propertys general manager and associates,
    have focused their efforts to cure these failures through
    enhanced service, increased cleanliness, and product
    improvements by the required cure date. If we do not achieve
    scores above required thresholds by the designated date, the
    hotel would be subject to default of its franchise agreement.
    Each hotel would receive another opportunity to improve its
    score before the hotel would be at the risk of having its
    franchise agreement terminated.







Sales and Marketing




5



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up-to on-site




1-800


Joint Ventures






Growth Strategy




6



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Competition and Seasonality








The Lodging Industry








| |                         
| | ------------------------
| | Chain-Scale Segmentation





| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | Upper Upscale (Hilton and Marriott);                                                                                      
|
| |  | Upscale (Courtyard by Marriott, Crowne Plaza, Radisson,
    Residence Inn by Marriott, and SpringHill Suites by Marriott);
|
| |  | Midscale with Food & Beverage (Clarion, DoubleTree
    Club, Holiday Inn, Holiday Inn Select, and Quality Inn);           
|
| |  | Midscale without Food & Beverage (Fairfield Inn by
    Marriott and Holiday Inn Express); and                             
|
| |  | Economy (Park Inn)                                                                                                        



7



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|                                 |  |          |      |                    |                       |  |      |  
|-------------------------------- |  | -------- | ---- | ------------------ | --------------------- |  | ---- | -
|                                 |  | 2005     |     
|                                 |  |          |     
|                                 |  |          |      | Lodgian Continuing |                      
|Chain-Scale Segment              |  | Industry |      |                    | Operations Hotels (A) | 
|                                 |  |          |      |                    |                       | 
|Upper Upscale                    |  |          | 9.8  | %                  |                       |  | 9.2  | %
|Upscale                          |  |          | 10.1 | %                  |                       |  | 8.6  | %
|Midscale with Food and Beverage  |  |          | 8.4  | %                  |                       |  | 4.2  | %
|Midscale without Food & beverage |  |          | 11.7 | %                  |                       |  | 15.0 | %
|Economy                          |  |          | 7.5  | %                  |                       |  | n/m  |  
|Overall Average                  |  |          | 8.4  | %                  |                       |  | 8.2  | %




Smith Travel Research




|    |  |                                                                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | 2005 RevPAR change related to our continuing operations hotels
    excluding the Pinehurst, West Palm Beach, Melbourne and Columbus
    hotels.



Properties


day-to




| |          
| | ---------
| | Portfolio



|                                                    |  |        |     |  |          |         |                          |              |  |  |                 | 
|--------------------------------------------------- |  | ------ | --- |  | -------- | ------- | ------------------------ | ------------ |  |  | --------------- | 
|                                                    |  |        |     |  |          | Year of |                         
|                                                    |  | No. of |     |  |          |         | Last Major Renovation or |             
|Franchisor/Hotel Name                               |  | Rooms  |     |  | Location |         |                          | Construction | 
|                                                    |  |        |     |  |          |         |                          |              | 
|InterContinental Hotels Group PLC (IHG) (46 hotels) |  |        |     |  |          |         |                          |              |  |  |                 | 
|Crowne Plaza Albany                                 |  |        | 384 |  |          |         | Albany, NY               |              |  |  | 2001            | 
|Crowne Plaza Cedar Rapids(2)                        |  |        | 275 |  |          |         | Cedar Rapids, IA         |              |  |  | 1998            | 
|Crowne Plaza Houston                                |  |        | 291 |  |          |         | Houston, TX              |              |  |  | 1999            | 
|Crowne Plaza Macon                                  |  |        | 297 |  |          |         | Macon, GA                |              |  |  | Being Renovated | 
|Crowne Plaza Pittsburgh                             |  |        | 193 |  |          |         | Pittsburgh, PA           |              |  |  | 2001            | 
|Crowne Plaza West Palm Beach (50% owned)            |  |        | 219 |  |          |         | West Palm Beach, FL      |              |  |  | 2005            | 
|Crowne Plaza Worcester                              |  |        | 243 |  |          |         | Worcester, MA            |              |  |  | 1996            | 
|Crowne Plaza Phoenix Airport                        |  |        | 299 |  |          |         | Phoenix, AZ              |              |  |  | 2004            | 
|Crowne Plaza Silver Spring                          |  |        | 231 |  |          |         | Silver Spring, MD        |              |  |  | 2005            | 

8



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|                                              |           |        |     |       |          |         |                          |              |  |                               |                 |  | 
|--------------------------------------------- | --------- | ------ | --- | ----- | -------- | ------- | ------------------------ | ------------ |  | ----------------------------- | --------------- |  | 
|                                              |           |        |     |       |          | Year of |                         
|                                              |           | No. of |     |       |          |         | Last Major Renovation or |             
|Franchisor/Hotel Name                         |           | Rooms  |     |       | Location |         |                          | Construction | 
|                                              |           |        |     |       |          |         |                          |              | 
|Crowne Plaza Melbourne (50% owned)            |           |        | 272 |       |          |         | Melbourne, FL            |              |  | Renovation completed Jan 2006
|Holiday Inn Express Dothan                    |           |        | 112 |       |          |         | Dothan, AL               |              |  |                               | 2002            | 
|Holiday Inn Express Palm Desert               |           |        | 129 |       |          |         | Palm Desert, CA          |              |  |                               | 2003            | 
|Holiday Inn Express Pensacola University Mall |           |        | 122 |       |          |         | Pensacola, FL            |              |  |                               | 2002            | 
|Holiday Inn Select DFW Airport                |           |        | 282 |       |          |         | Dallas, TX               |              |  |                               | 1997            | 
|Holiday Inn Select Strongsville               |           |        | 302 |       |          |         | Cleveland, OH            |              |  |                               | 2005            | 
|Holiday Inn Select Windsor                    |           |        | 214 |       |          |         | Windsor, Ontario         |              |  |                               | 2004            | 
|Holiday Inn Arden Hills/ St. Paul             |           |        | 156 |       |          |         | St. Paul, MN             |              |  |                               | 1995            | 
|Holiday Inn BWI Airport                       |           |        | 260 |       |          |         | Baltimore, MD            |              |  |                               | 2000            | 
|Holiday Inn Clarksburg                        |           |        | 159 |       |          |         | Clarksburg, WV           |              |  |                               | Being Renovated | 
|Holiday Inn Cromwell Bridge                   |           |        | 139 |       |          |         | Cromwell Bridge, MD      |              |  |                               | 2000            | 
|Holiday Inn East Hartford                     |           |        | 130 |       |          |         | East Hartford, CT        |              |  |                               | 2000            | 
|Holiday Inn Fairmont                          |           |        | 106 |       |          |         | Fairmont, WV             |              |  |                               | 1997            | 
|Holiday Inn Fort Wayne                        |           |        | 208 |       |          |         | Fort Wayne, IN           |              |  |                               | 1995            | 
|Holiday Inn Frederick                         |           |        | 158 |       |          |         | Frederick, MD            |              |  |                               | 2000            | 
|Holiday Inn Frisco                            |           |        | 217 |       |          |         | Frisco, CO               |              |  |                               | 1997            | 
|Holiday Inn Glen Burnie North                 |           |        | 127 |       |          |         | Glen Burnie, MD          |              |  |                               | 2000            | 
|Holiday Inn Greentree                         |           |        | 201 |       |          |         | Pittsburgh, PA           |              |  |                               | 2000            | 
|Holiday Inn Hamburg                           |           |        | 130 |       |          |         | Buffalo, NY              |              |  |                               | 1998            | 
|Holiday Inn Hilton Head                       |           |        | 202 |       |          |         | Hilton Head, SC          |              |  |                               | 2001            | 
|Holiday Inn Inner Harbor                      |           |        | 375 |       |          |         | Baltimore, MD            |              |  |                               | Being Renovated | 
|Holiday Inn Jamestown                         |           |        | 146 |       |          |         | Jamestown, NY            |              |  |                               | 1998            | 
|Holiday Inn Jekyll Island                     |           |        | 198 |       |          |         | Jekyll Island, GA        |              |  |                               | 2000            | 
|Holiday Inn Lancaster (East)                  |           |        | 189 |       |          |         | Lancaster, PA            |              |  |                               | 2000            | 
|Holiday Inn Lansing West                      |           |        | 244 |       |          |         | Lansing, MI              |              |  |                               | 1998            | 
|Holiday Inn Marietta(3)                       |           |        | 193 |       |          |         | Marietta, GA             |              |  |                               | 2003            | 
|Holiday Inn McKnight Road(1)                  |           |        | 146 |       |          |         | Pittsburgh, PA           |              |  |                               | 1995            | 
|Holiday Inn Meadowlands                       |           |        | 138 |       |          |         | Pittsburgh, PA           |              |  |                               | 2005            | 
|Holiday Inn Monroeville                       |           |        | 187 |       |          |         | Monroeville, PA          |              |  |                               | 2005            | 
|Holiday Inn Myrtle Beach                      |           |        | 133 |       |          |         | Myrtle Beach, SC         |              |  |                               | Being Renovated | 
|Holiday Inn Phoenix West                      |           |        | 144 |       |          |         | Phoenix, AZ              |              |  |                               | 2003            | 
|Holiday Inn Santa Fe                          |           |        | 130 |       |          |         | Santa Fe, NM             |              |  |                               | 2003            | 
|Holiday Inn Sheffield(2)                      |           |        | 201 |       |          |         | Sheffield, AL            |              |  | Renovation completed Jan 2006
|Holiday Inn University Mall                   |           |        | 152 |       |          |         | Pensacola, FL            |              |  |                               | 1997            | 
|Holiday Inn Valdosta(2)                       |           |        | 167 |       |          |         | Valdosta, GA             |              |  |                               | 2003            | 
|Holiday Inn Winter Haven                      |           |        | 228 |       |          |         | Winter Haven, FL         |              |  |                               | 2004            | 
|Holiday Inn York                              |           |        | 100 |       |          |         | York, PA                 |              |  |                               | 2000            | 
|                                              |           |        |     |       |          |         |                          |              | 
|                                              | Total IHG |        |     | 9,129 |          |         |                          |              |  |                               |                 |  | 

9



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|                                               |                |        |     |       |          |         |                          |              |  |  |      |  | 
|---------------------------------------------- | -------------- | ------ | --- | ----- | -------- | ------- | ------------------------ | ------------ |  |  | ---- |  | 
|                                               |                |        |     |       |          | Year of |                         
|                                               |                | No. of |     |       |          |         | Last Major Renovation or |             
|Franchisor/Hotel Name                          |                | Rooms  |     |       | Location |         |                          | Construction | 
|                                               |                |        |     |       |          |         |                          |              | 
|Marriott International Inc. (16 hotels)        |                |        |     |       |          |         |                          |              |  |  |      | 
|Courtyard by Marriott Abilene                  |                |        | 99  |       |          |         | Abilene, TX              |              |  |  | 2004 | 
|Courtyard by Marriott Bentonville              |                |        | 90  |       |          |         | Bentonville, AR          |              |  |  | 2004 | 
|Courtyard by Marriott Buckhead                 |                |        | 181 |       |          |         | Atlanta, GA              |              |  |  | 2004 | 
|Courtyard by Marriott Florence                 |                |        | 78  |       |          |         | Florence, KY             |              |  |  | 2004 | 
|Courtyard by Marriott Lafayette                |                |        | 90  |       |          |         | Lafayette, LA            |              |  |  | 2004 | 
|Courtyard by Marriott Paducah                  |                |        | 100 |       |          |         | Paducah, KY              |              |  |  | 2004 | 
|Courtyard by Marriott Tulsa                    |                |        | 122 |       |          |         | Tulsa, OK                |              |  |  | 2004 | 
|Fairfield Inn by Marriott Augusta              |                |        | 117 |       |          |         | Augusta, GA              |              |  |  | 2002 | 
|Fairfield Inn by Marriott Colchester(2)        |                |        | 117 |       |          |         | Colchester, VT           |              |  |  | 2002 | 
|Fairfield Inn by Marriott Jackson(1)           |                |        | 105 |       |          |         | Jackson, TN              |              |  |  | 2002 | 
|Fairfield Inn by Marriott Merrimack            |                |        | 116 |       |          |         | Merrimack, NH            |              |  |  | 2004 | 
|Fairfield Inn by Marriott Valdosta(2)          |                |        | 108 |       |          |         | Valdosta, GA             |              |  |  | 2004 | 
|Marriott Denver Airport                        |                |        | 238 |       |          |         | Denver, CO               |              |  |  | 1998 | 
|Residence Inn by Marriott Dedham               |                |        | 81  |       |          |         | Dedham, MA               |              |  |  | 2004 | 
|Residence Inn by Marriott Little Rock          |                |        | 96  |       |          |         | Little Rock, AR          |              |  |  | 1998 | 
|Springhill Suites by Marriott Pinehurst        |                |        | 107 |       |          |         | Pinehurst, NC            |              |  |  | 1999 | 
|                                               |                |        |     |       |          |         |                          |              | 
|                                               | Total Marriott |        |     | 1,845 |          |         |                          |              |  |  |      |  | 
|                                              
|Hilton Hotels Corporation (4 hotels)           |                |        |     |       |          |         |                          |              |  |  |      | 
|Doubletree Club Philadelphia                   |                |        | 190 |       |          |         | Philadelphia, PA         |              |  |  | 2003 | 
|Hilton Fort Wayne                              |                |        | 244 |       |          |         | Fort Wayne, IN           |              |  |  | 2003 | 
|Hilton Columbia                                |                |        | 152 |       |          |         | Columbia, MD             |              |  |  | 2003 | 
|Hilton Northfield                              |                |        | 191 |       |          |         | Troy, MI                 |              |  |  | 2003 | 
|                                               |                |        |     |       |          |         |                          |              | 
|                                               | Total Hilton   |        |     | 777   |          |         |                          |              |  |  |      |  | 
|                                              
|Choice Hotels International, Inc. (4 hotels)   |                |        |     |       |          |         |                          |              |  |  |      | 
|Clarion Northwoods Atrium Inn                  |                |        | 197 |       |          |         | Charleston, SC           |              |  |  | 1994 | 
|Clarion Hotel Louisville                       |                |        | 393 |       |          |         | Louisville, KY           |              |  |  | 2000 | 
|Quality Hotel Metairie(1)                      |                |        | 205 |       |          |         | New Orleans, LA          |              |  |  | 2005 | 
|Quality Inn Dothan                             |                |        | 102 |       |          |         | Dothan, AL               |              |  |  | 1996 | 
|                                               |                |        |     |       |          |         |                          |              | 
|                                               | Total Choice   |        |     | 897   |          |         |                          |              |  |  |      |  | 
|                                              
|Carlson Companies (3 hotels)                   |                |        |     |       |          |         |                          |              |  |  |      | 
|Radisson Phoenix Hotel                         |                |        | 159 |       |          |         | Phoenix, AZ              |              |  |  | 2005 | 
|Radisson New Orleans Airport Hotel (82% owned) |                |        | 244 |       |          |         | New Orleans, LA          |              |  |  | 2005 | 
|Park Inn Brunswick                             |                |        | 126 |       |          |         | Brunswick, GA            |              |  |  | 2005 | 
|                                               |                |        |     |       |          |         |                          |              | 
|                                               | Total Carlson  |        |     | 529   |          |         |                          |              |  |  |      |  | 

10



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|                                 |                             |        |     |        |          |         |                          |              |  |  |      |  | 
|-------------------------------- | --------------------------- | ------ | --- | ------ | -------- | ------- | ------------------------ | ------------ |  |  | ---- |  | 
|                                 |                             |        |     |        |          | Year of |                         
|                                 |                             | No. of |     |        |          |         | Last Major Renovation or |             
|Franchisor/Hotel Name            |                             | Rooms  |     |        | Location |         |                          | Construction | 
|                                 |                             |        |     |        |          |         |                          |              | 
|Non-franchised hotels (2 hotels) |                             |        |     |        |          |         |                          |              |  |  |      | 
|French Quarter Suites Memphis    |                             |        | 105 |        |          |         | Memphis, TN              |              |  |  | 1997 | 
|University Inn, Bloomington      |                             |        | 186 |        |          |         | Bloomington, IN          |              |  |  | 1992 | 
|                                 |                             |        |     |        |          |         |                          |              | 
|                                 | Total non-franchised hotels |        |     | 291    |          |         |                          |              |  |  |      |  | 
|                                 |                             |        |     |        |          |         |                          |              | 
|                                 | All hotels (75 hotels)      |        |     | 13,468 |          |         |                          |              |  |  |      |  | 
|                                 |                             |        |     |        |          |         |                          |              | 






|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These hotels are held for sale and are classified in
    discontinued operations as of December 31, 2005.                                                  
|   
|(2) | These hotels were identified as held for sale in the first two
    months of 2006, and are classified in continuing operations as
    of December 31, 2005.
|   
|(3) | This hotel is currently closed as a result of a fire on
    January 15, 2006.                                                                              





| |             
| | ------------
| | Dispositions



|                                                                    |                  |           |    |      |         |  |   |    |  
|------------------------------------------------------------------- | ---------------- | --------- | -- | ---- | ------- |  | - | -- | -
|                                                                    |                  | Number of |   
|                                                                    |                  |           |   
|                                                                    |                  |           |    | Land |        
|                                                                    |                  | Hotels    |    |      | Parcels | 
|                                                                    |                  |           |    |      |         | 
|Owned at December 31, 2003                                          |                  |           | 96 |      |         |  | 3 |   
|                                                                    | Sold in 2004     |           |    | (11  | )       |  |   | (2 | )
|                                                                    | Acquired in 2004 |           |    | 1    |         |  |   |   |  
|                                                                    |                  |           |    |      |         | 
|Owned at December 31, 2004                                          |                  |           | 86 |      |         |  | 1 |   
|                                                                    | Sold in 2005     |           |    | (8   | )       |  |   |   |  
|                                                                    |                  |           |    |      |         | 
|Owned at December 31, 2005                                          |                  |           | 78 |      |         |  | 1 |   
|Surrendered to lender between January 1, 2006 and
    March 1, 2006 |                  |           | (3 | )    |         |  |  |   
|                                                                    |                  |           |    |      |         | 
|Owned at March 1, 2006                                              |                  |           | 75 |      |         |  | 1 |   
|                                                                    |                  |           |    |      |         | 

11



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##### Table of Contents





| |                                        
| | ---------------------------------------
| | Hotel data by market segment and region





| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Holiday Inn City Center Columbus, OH hotel is excluded
    because it was surrendered to a receiver on November 15,
    2005 and deeded to the lender on February 3, 2006:                                              
|
| |  | the SpringHill Suites by Marriott hotel in Pinehurst, NC
    (acquired in December 2004) is excluded because we do not have
    comparative year information for the years ended
    December 31, 2004 or December 31, 2003;
|
| |  | the Crowne Plaza Melbourne, FL hotel is excluded because it was
    closed throughout 2005 (and from September through December
    2004) for hurricane renovations; and                                                    
|
| |  | the Crowne Plaza West Palm Beach, FL hotel is excluded because
    it was closed during most of 2005 (and from September through
    December 2004) for hurricane renovations.                                              





| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Combined Continuing and Discontinued
    Operations  74 hotels (excludes the Pinehurst, West
    Palm Beach, Melbourne and Columbus hotels)

|                              |                      |                  |   |            |              |  |   |              |     |   |              |       |      |   |   |       |      |   
|----------------------------- | -------------------- | ---------------- | - | ---------- | ------------ |  | - | ------------ | --- | - | ------------ | ----- | ---- | - | - | ----- | ---- | --
|                              |                      |                  |   | Year Ended |             
|                              |                      |                  |   |            |             
|                              |                      | 2005 Capital     |   |            | December 31, |  |   | December 31, |     |   | December 31, |      
|                              |                      | Expenditures     |   |            | 2005         |  |   | 2004         |     |   | 2003         |      
|                              |                      |                  |   |            |              |  |   |              |     |   |              |      
|                              |                      | ($ in thousands) |   |            |              |  |   |              |    
|Upper Upscale                 |                      |                  |   |            |              |  |   |              |     |   |              |       |      |   |   |      
|                              | Number of properties |                  | $ | 583        |              |  |   | 4            |     |   |              | 4     |      |   |   | 4     |     
|                              | Number of rooms      |                  |   |            |              |  |   | 825          |     |   |              | 825   |      |   |   | 825   |     
|                              | Occupancy            |                  |   |            |              |  |   | 69.7         | %   |   |              | 67.3  | %    |   |   | 60.7  | %   
|                              | Average daily rate   |                  |   |            |              |  | $ | 101.39       |     |   | $            | 96.09 |      |   | $ | 90.98 |     
|                              | RevPAR               |                  |   |            |              |  | $ | 70.63        |     |   | $            | 64.66 |      |   | $ | 55.23 |     
|                              |                      | RevPAR change    |   |            |              |  |   |              | 9.2 | % |              |       | 17.1 | % |   |       | (9.9 | )%
|Upscale                       |                      |                  |   |            |              |  |   |              |     |   |              |       |      |   |   |      
|                              | Number of properties |                  |   | 11,230     |              |  |   | 18           |     |   |              | 16    |      |   |   | 16    |     
|                              | Number of rooms      |                  |   |            |              |  |   | 3,322        |     |   |              | 2,779 |      |   |   | 2,779 |     
|                              | Occupancy            |                  |   |            |              |  |   | 67.7         | %   |   |              | 65.7  | %    |   |   | 64.6  | %   
|                              | Average daily rate   |                  |   |            |              |  | $ | 90.01        |     |   | $            | 85.41 |      |   | $ | 83.49 |     
|                              | RevPAR               |                  |   |            |              |  | $ | 60.96        |     |   | $            | 56.15 |      |   | $ | 53.97 |     
|                              |                      | RevPAR change    |   |            |              |  |   |              | 8.6 | % |              |       | 4.0  | % |   |       | (3.7 | )%
|Midscale with Food & Beverage |                      |                  |   |            |              |  |   |              |     |   |              |       |      |   |   |      
|                              | Number of properties |                  |   | 35,608     |              |  |   | 41           |     |   |              | 43    |      |   |   | 43    |     
|                              | Number of rooms      |                  |   |            |              |  |   | 7,769        |     |   |              | 8,194 |      |   |   | 8,194 |     
|                              | Occupancy            |                  |   |            |              |  |   | 59.2         | %   |   |              | 60.4  | %    |   |   | 60.0  | %   
|                              | Average daily rate   |                  |   |            |              |  | $ | 78.99        |     |   | $            | 74.01 |      |   | $ | 71.82 |     
|                              | RevPAR               |                  |   |            |              |  | $ | 46.73        |     |   | $            | 44.67 |      |   | $ | 43.13 |     
|                              |                      | RevPAR change    |   |            |              |  |   |              | 4.6 | % |              |       | 3.6  | % |   |       | (2.2 | )%

12



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|                                 |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |        |       |   
|-------------------------------- | -------------------- | ---------------- |  | ---------- | ------------ |  | - | ------------ | ---- | - | ------------ | ------ | ---- | -- | - | ------ | ----- | --
|                                 |                      |                  |  | Year Ended |             
|                                 |                      |                  |  |            |             
|                                 |                      | 2005 Capital     |  |            | December 31, |  |   | December 31, |      |   | December 31, |       
|                                 |                      | Expenditures     |  |            | 2005         |  |   | 2004         |      |   | 2003         |       
|                                 |                      |                  |  |            |              |  |   |              |      |   |              |       
|                                 |                      | ($ in thousands) |  |            |              |  |   |              |     
|Midscale without Food & Beverage |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 1,571      |              |  |   | 8            |      |   |              | 8      |      |    |   | 8      |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 926          |      |   |              | 926    |      |    |   | 926    |      
|                                 | Occupancy            |                  |  |            |              |  |   | 65.7         | %    |   |              | 63.2   | %    |    |   | 56.0   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 67.54        |      |   | $            | 61.22  |      |    | $ | 59.49  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 44.40        |      |   | $            | 38.67  |      |    | $ | 33.29  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 14.8 | % |              |        | 16.1 | %  |   |        | (4.5  | )%
|Economy                          |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 2,107      |              |  |   | 1            |      |   |              |       |      |    |   |       |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 126          |      |   |              |       |      |    |   |       |      
|                                 | Occupancy            |                  |  |            |              |  |   | 49.3         | %    |   |              |       |      |    |   |       |      
|                                 | Average daily rate   |                  |  |            |              |  | $ | 62.98        |      |   |              |       |      |    |   |       |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 31.02        |      |   |              |       |      |    |   |       |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | n/m  |   |              |        |     |    |   |        |      |   
|Independent Hotels               |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 108        |              |  |   | 2            |      |   |              | 3      |      |    |   | 3      |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 291          |      |   |              | 535    |      |    |   | 535    |      
|                                 | Occupancy            |                  |  |            |              |  |   | 34.7         | %    |   |              | 36.6   | %    |    |   | 41.4   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 67.97        |      |   | $            | 63.27  |      |    | $ | 61.98  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 23.58        |      |   | $            | 23.17  |      |    | $ | 25.64  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 1.8  | % |              |        | (9.6 | )% |   |        | (14.3 | )%
|All Hotels                       |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 51,207     |              |  |   | 74           |      |   |              | 74     |      |    |   | 74     |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 13,259       |      |   |              | 13,259 |      |    |   | 13,259 |      
|                                 | Occupancy            |                  |  |            |              |  |   | 61.8         | %    |   |              | 61.2   | %    |    |   | 60.0   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 82.49        |      |   | $            | 76.91  |      |    | $ | 74.59  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 50.97        |      |   | $            | 47.04  |      |    | $ | 44.76  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 8.4  | % |              |        | 5.1  | %  |   |        | (3.7  | )%



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Continuing Operations  71 hotels (excludes the
    Pinehurst, West Palm Beach, Melbourne and Columbus hotels, and
    three hotels held for sale as of December 31, 2005).

|              |                      |                  |   |            |              |  |   |              |     |   |              |       |      |   |   |       |      |   
|------------- | -------------------- | ---------------- | - | ---------- | ------------ |  | - | ------------ | --- | - | ------------ | ----- | ---- | - | - | ----- | ---- | --
|              |                      |                  |   | Year Ended |             
|              |                      |                  |   |            |             
|              |                      | 2005 Capital     |   |            | December 31, |  |   | December 31, |     |   | December 31, |      
|              |                      | Expenditures     |   |            | 2005         |  |   | 2004         |     |   | 2003         |      
|              |                      |                  |   |            |              |  |   |              |     |   |              |      
|              |                      | ($ in thousands) |   |            |              |  |   |              |    
|Upper Upscale |                      |                  |   |            |              |  |   |              |     |   |              |       |      |   |   |      
|              | Number of properties |                  | $ | 583        |              |  |   | 4            |     |   |              | 4     |      |   |   | 4     |     
|              | Number of rooms      |                  |   |            |              |  |   | 825          |     |   |              | 825   |      |   |   | 825   |     
|              | Occupancy            |                  |   |            |              |  |   | 69.7         | %   |   |              | 67.3  | %    |   |   | 60.7  | %   
|              | Average daily rate   |                  |   |            |              |  | $ | 101.39       |     |   | $            | 96.09 |      |   | $ | 90.98 |     
|              | RevPAR               |                  |   |            |              |  | $ | 70.63        |     |   | $            | 64.66 |      |   | $ | 55.23 |     
|              |                      | RevPAR change    |   |            |              |  |   |              | 9.2 | % |              |       | 17.1 | % |   |       | (9.9 | )%

13



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##### Table of Contents



|                                 |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |        |       |   
|-------------------------------- | -------------------- | ---------------- |  | ---------- | ------------ |  | - | ------------ | ---- | - | ------------ | ------ | ---- | -- | - | ------ | ----- | --
|                                 |                      |                  |  | Year Ended |             
|                                 |                      |                  |  |            |             
|                                 |                      | 2005 Capital     |  |            | December 31, |  |   | December 31, |      |   | December 31, |       
|                                 |                      | Expenditures     |  |            | 2005         |  |   | 2004         |      |   | 2003         |       
|                                 |                      |                  |  |            |              |  |   |              |      |   |              |       
|                                 |                      | ($ in thousands) |  |            |              |  |   |              |     
|Upscale                          |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 11,230     |              |  |   | 18           |      |   |              | 16     |      |    |   | 16     |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 3,322        |      |   |              | 2,779  |      |    |   | 2,779  |      
|                                 | Occupancy            |                  |  |            |              |  |   | 67.7         | %    |   |              | 65.7   | %    |    |   | 64.6   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 90.01        |      |   | $            | 85.41  |      |    | $ | 83.49  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 60.96        |      |   | $            | 56.15  |      |    | $ | 53.97  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 8.6  | % |              |        | 4.0  | %  |   |        | (3.7  | )%
|Midscale with Food & Beverage    |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 33,546     |              |  |   | 39           |      |   |              | 41     |      |    |   | 41     |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 7,418        |      |   |              | 7,843  |      |    |   | 7,843  |      
|                                 | Occupancy            |                  |  |            |              |  |   | 59.3         | %    |   |              | 60.5   | %    |    |   | 60.3   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 79.30        |      |   | $            | 74.67  |      |    | $ | 72.37  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 47.05        |      |   | $            | 45.16  |      |    | $ | 43.63  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 4.2  | % |              |        | 3.5  | %  |   |        | (2.0  | )%
|Midscale without Food & Beverage |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 1,423      |              |  |   | 7            |      |   |              | 7      |      |    |   | 7      |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 821          |      |   |              | 821    |      |    |   | 821    |      
|                                 | Occupancy            |                  |  |            |              |  |   | 66.6         | %    |   |              | 63.7   | %    |    |   | 55.4   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 68.73        |      |   | $            | 62.49  |      |    | $ | 60.38  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 45.77        |      |   | $            | 39.79  |      |    | $ | 33.43  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 15.0 | % |              |        | 19.0 | %  |   |        | (6.8  | )%
|Economy                          |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 2,107      |              |  |   | 1            |      |   |              |       |      |    |   |       |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 126          |      |   |              |       |      |    |   |       |      
|                                 | Occupancy            |                  |  |            |              |  |   | 49.3         | %    |   |              |       |      |    |   |       |      
|                                 | Average daily rate   |                  |  |            |              |  | $ | 62.98        |      |   |              |       |      |    |   |       |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 31.02        |      |   |              |       |      |    |   |       |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | n/m  |   |              |        |     |    |   |        |      |   
|Independent Hotels               |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 108        |              |  |   | 2            |      |   |              | 3      |      |    |   | 3      |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 291          |      |   |              | 535    |      |    |   | 535    |      
|                                 | Occupancy            |                  |  |            |              |  |   | 34.7         | %    |   |              | 36.6   | %    |    |   | 41.4   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 67.97        |      |   | $            | 63.27  |      |    | $ | 61.98  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 23.58        |      |   | $            | 23.17  |      |    | $ | 25.64  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 1.8  | % |              |        | (9.6 | )% |   |        | (14.3 | )%
|All Hotels                       |                      |                  |  |            |              |  |   |              |      |   |              |        |      |    |   |       
|                                 | Number of properties |                  |  | 48,997     |              |  |   | 71           |      |   |              | 71     |      |    |   | 71     |      
|                                 | Number of rooms      |                  |  |            |              |  |   | 12,803       |      |   |              | 12,803 |      |    |   | 12,803 |      
|                                 | Occupancy            |                  |  |            |              |  |   | 62.0         | %    |   |              | 61.3   | %    |    |   | 60.2   | %    
|                                 | Average daily rate   |                  |  |            |              |  | $ | 82.95        |      |   | $            | 77.59  |      |    | $ | 75.17  |      
|                                 | RevPAR               |                  |  |            |              |  | $ | 51.41        |      |   | $            | 47.54  |      |    | $ | 45.22  |      
|                                 |                      | RevPAR change    |  |            |              |  |   |              | 8.2  | % |              |        | 5.1  | %  |   |        | (3.7  | )%

14



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##### Table of Contents







| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | Upper Upscale: Hilton and Marriott;                                                                                     
|
| |  | Upscale: Courtyard by Marriott, Crowne Plaza, Radisson,
    Residence Inn by Marriott and SpringHill Suites by Marriott;
|
| |  | Midscale with Food & Beverage: Clarion, Doubletree
    Club, Holiday Inn, Holiday Inn Select, and Quality Inn;          
|
| |  | Midscale without Food & Beverage: Fairfield Inn by
    Marriott and Holiday Inn Express; and                            
|
| |  | Economy: Park Inn                                                                                                       





| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Combined Continuing and Discontinued
    Operations  74 hotels (excludes the Pinehurst, West
    Palm Beach, Melbourne and Columbus hotels)

|                 |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |       |      |   
|---------------- | -------------------- | ---------------- | - | ---------- | ------------ |  | - | ------------ | ---- | - | ------------ | ----- | --- | - | - | ----- | ---- | --
|                 |                      |                  |   | Year Ended |             
|                 |                      |                  |   |            |             
|                 |                      | 2005 Capital     |   |            | December 31, |  |   | December 31, |      |   | December 31, |      
|                 |                      | Expenditures     |   |            | 2005         |  |   | 2004         |      |   | 2003         |      
|                 |                      |                  |   |            |              |  |   |              |      |   |              |      
|                 |                      | ($ in thousands) |   |            |              |  |   |              |     
|Northeast Region |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |      
|                 | Number of properties |                  | $ | 25,455     |              |  |   | 27           |      |   |              | 27    |     |   |   | 27    |     
|                 | Number of rooms      |                  |   |            |              |  |   | 4,914        |      |   |              | 4,914 |     |   |   | 4,914 |     
|                 | Occupancy            |                  |   |            |              |  |   | 64.0         | %    |   |              | 65.9  | %   |   |   | 65.2  | %   
|                 | Average daily rate   |                  |   |            |              |  | $ | 89.92        |      |   | $            | 84.73 |     |   | $ | 82.27 |     
|                 | RevPAR               |                  |   |            |              |  | $ | 57.53        |      |   | $            | 55.85 |     |   | $ | 53.60 |     
|                 |                      | RevPAR change    |   |            |              |  |   |              | 3.0  | % |              |       | 4.2 | % |   |       | (2.2 | )%
|Southeast Region |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |      
|                 | Number of properties |                  |   | 19,789     |              |  |   | 25           |      |   |              | 25    |     |   |   | 25    |     
|                 | Number of rooms      |                  |   |            |              |  |   | 4,156        |      |   |              | 4,156 |     |   |   | 4,156 |     
|                 | Occupancy            |                  |   |            |              |  |   | 59.0         | %    |   |              | 56.9  | %   |   |   | 55.7  | %   
|                 | Average daily rate   |                  |   |            |              |  | $ | 75.43        |      |   | $            | 67.48 |     |   | $ | 65.31 |     
|                 | RevPAR               |                  |   |            |              |  | $ | 44.53        |      |   | $            | 38.39 |     |   | $ | 36.38 |     
|                 |                      | RevPAR change    |   |            |              |  |   |              | 16.0 | % |              |       | 5.5 | % |   |       | (4.1 | )%
|Midwest Region   |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |      
|                 | Number of properties |                  |   | 2,153      |              |  |   | 15           |      |   |              | 15    |     |   |   | 15    |     
|                 | Number of rooms      |                  |   |            |              |  |   | 2,873        |      |   |              | 2,873 |     |   |   | 2,873 |     
|                 | Occupancy            |                  |   |            |              |  |   | 59.5         | %    |   |              | 58.7  | %   |   |   | 56.2  | %   
|                 | Average daily rate   |                  |   |            |              |  | $ | 76.86        |      |   | $            | 72.54 |     |   | $ | 71.05 |     
|                 | RevPAR               |                  |   |            |              |  | $ | 45.73        |      |   | $            | 42.59 |     |   | $ | 39.92 |     
|                 |                      | RevPAR change    |   |            |              |  |   |              | 7.4  | % |              |       | 6.7 | % |   |       | (6.0 | )%

15



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##### Table of Contents



|            |                      |                  |  |            |              |  |   |              |      |   |              |        |     |   |   |        |      |   
|----------- | -------------------- | ---------------- |  | ---------- | ------------ |  | - | ------------ | ---- | - | ------------ | ------ | --- | - | - | ------ | ---- | --
|            |                      |                  |  | Year Ended |             
|            |                      |                  |  |            |             
|            |                      | 2005 Capital     |  |            | December 31, |  |   | December 31, |      |   | December 31, |       
|            |                      | Expenditures     |  |            | 2005         |  |   | 2004         |      |   | 2003         |       
|            |                      |                  |  |            |              |  |   |              |      |   |              |       
|            |                      | ($ in thousands) |  |            |              |  |   |              |     
|West Region |                      |                  |  |            |              |  |   |              |      |   |              |        |     |   |   |       
|            | Number of properties |                  |  | 3,810      |              |  |   | 7            |      |   |              | 7      |     |   |   | 7      |     
|            | Number of rooms      |                  |  |            |              |  |   | 1,316        |      |   |              | 1,316  |     |   |   | 1,316  |     
|            | Occupancy            |                  |  |            |              |  |   | 67.4         | %    |   |              | 62.2   | %   |   |   | 62.8   | %   
|            | Average daily rate   |                  |  |            |              |  | $ | 86.69        |      |   | $            | 82.17  |     |   | $ | 77.69  |     
|            | RevPAR               |                  |  |            |              |  | $ | 58.45        |      |   | $            | 51.12  |     |   | $ | 48.79  |     
|            |                      | RevPAR change    |  |            |              |  |   |              | 14.3 | % |              |        | 4.8 | % |   |        | (4.6 | )%
|All Hotels  |                      |                  |  |            |              |  |   |              |      |   |              |        |     |   |   |       
|            | Number of properties |                  |  | 51,207     |              |  |   | 74           |      |   |              | 74     |     |   |   | 74     |     
|            | Number of rooms      |                  |  |            |              |  |   | 13,259       |      |   |              | 13,259 |     |   |   | 13,259 |     
|            | Occupancy            |                  |  |            |              |  |   | 61.8         | %    |   |              | 61.2   | %   |   |   | 60.0   | %   
|            | Average daily rate   |                  |  |            |              |  | $ | 82.49        |      |   | $            | 76.91  |     |   | $ | 74.59  |     
|            | RevPAR               |                  |  |            |              |  | $ | 50.97        |      |   | $            | 47.04  |     |   | $ | 44.76  |     
|            |                      | RevPAR change    |  |            |              |  |   |              | 8.4  | % |              |        | 5.1 | % |   |        | (3.7 | )%



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Continuing Operations  71 hotels (excludes the
    Pinehurst, West Palm Beach, Melbourne and Columbus hotels, and
    three hotels held for sale as of December 31, 2005).

|                 |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |       |      |   
|---------------- | -------------------- | ---------------- | - | ---------- | ------------ |  | - | ------------ | ---- | - | ------------ | ----- | --- | - | - | ----- | ---- | --
|                 |                      |                  |   | Year Ended |             
|                 |                      |                  |   |            |             
|                 |                      | 2005 Capital     |   |            | December 31, |  |   | December 31, |      |   | December 31, |      
|                 |                      | Expenditures     |   |            | 2005         |  |   | 2004         |      |   | 2003         |      
|                 |                      |                  |   |            |              |  |   |              |      |   |              |      
|                 |                      | ($ in thousands) |   |            |              |  |   |              |     
|Northeast Region |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |      
|                 | Number of properties |                  | $ | 25,421     |              |  |   | 26           |      |   |              | 26    |     |   |   | 26    |     
|                 | Number of rooms      |                  |   |            |              |  |   | 4,768        |      |   |              | 4,768 |     |   |   | 4,768 |     
|                 | Occupancy            |                  |   |            |              |  |   | 64.3         | %    |   |              | 66.3  | %   |   |   | 65.5  | %   
|                 | Average daily rate   |                  |   |            |              |  | $ | 90.28        |      |   | $            | 84.99 |     |   | $ | 82.57 |     
|                 | RevPAR               |                  |   |            |              |  | $ | 58.10        |      |   | $            | 56.36 |     |   | $ | 54.10 |     
|                 |                      | RevPAR change    |   |            |              |  |   |              | 3.1  | % |              |       | 4.2 | % |   |       | (2.0 | )%
|Southeast Region |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |      
|                 | Number of properties |                  |   | 17,613     |              |  |   | 23           |      |   |              | 23    |     |   |   | 23    |     
|                 | Number of rooms      |                  |   |            |              |  |   | 3,846        |      |   |              | 3,846 |     |   |   | 3,846 |     
|                 | Occupancy            |                  |   |            |              |  |   | 59.1         | %    |   |              | 56.6  | %   |   |   | 55.6  | %   
|                 | Average daily rate   |                  |   |            |              |  | $ | 76.23        |      |   | $            | 69.04 |     |   | $ | 66.49 |     
|                 | RevPAR               |                  |   |            |              |  | $ | 45.03        |      |   | $            | 39.08 |     |   | $ | 36.95 |     
|                 |                      | RevPAR change    |   |            |              |  |   |              | 15.2 | % |              |       | 5.8 | % |   |       | (4.4 | )%
|Midwest Region   |                      |                  |   |            |              |  |   |              |      |   |              |       |     |   |   |      
|                 | Number of properties |                  |   | 2,153      |              |  |   | 15           |      |   |              | 15    |     |   |   | 15    |     
|                 | Number of rooms      |                  |   |            |              |  |   | 2,873        |      |   |              | 2,873 |     |   |   | 2,873 |     
|                 | Occupancy            |                  |   |            |              |  |   | 59.5         | %    |   |              | 58.7  | %   |   |   | 56.2  | %   
|                 | Average daily rate   |                  |   |            |              |  | $ | 76.86        |      |   | $            | 72.54 |     |   | $ | 71.05 |     
|                 | RevPAR               |                  |   |            |              |  | $ | 45.73        |      |   | $            | 42.59 |     |   | $ | 39.92 |     
|                 |                      | RevPAR change    |   |            |              |  |   |              | 7.4  | % |              |       | 6.7 | % |   |       | (6.0 | )%

16



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##### Table of Contents



|            |                      |                  |  |            |              |  |   |              |      |   |              |        |     |   |   |        |      |   
|----------- | -------------------- | ---------------- |  | ---------- | ------------ |  | - | ------------ | ---- | - | ------------ | ------ | --- | - | - | ------ | ---- | --
|            |                      |                  |  | Year Ended |             
|            |                      |                  |  |            |             
|            |                      | 2005 Capital     |  |            | December 31, |  |   | December 31, |      |   | December 31, |       
|            |                      | Expenditures     |  |            | 2005         |  |   | 2004         |      |   | 2003         |       
|            |                      |                  |  |            |              |  |   |              |      |   |              |       
|            |                      | ($ in thousands) |  |            |              |  |   |              |     
|West Region |                      |                  |  |            |              |  |   |              |      |   |              |        |     |   |   |       
|            | Number of properties |                  |  | 3,810      |              |  |   | 7            |      |   |              | 7      |     |   |   | 7      |     
|            | Number of rooms      |                  |  |            |              |  |   | 1,316        |      |   |              | 1,316  |     |   |   | 1,316  |     
|            | Occupancy            |                  |  |            |              |  |   | 67.4         | %    |   |              | 62.2   | %   |   |   | 62.8   | %   
|            | Average daily rate   |                  |  |            |              |  | $ | 86.69        |      |   | $            | 82.17  |     |   | $ | 77.69  |     
|            | RevPAR               |                  |  |            |              |  | $ | 58.45        |      |   | $            | 51.12  |     |   | $ | 48.79  |     
|            |                      | RevPAR change    |  |            |              |  |   |              | 14.3 | % |              |        | 4.8 | % |   |        | (4.6 | )%
|All Hotels  |                      |                  |  |            |              |  |   |              |      |   |              |        |     |   |   |       
|            | Number of properties |                  |  | 48,997     |              |  |   | 71           |      |   |              | 71     |     |   |   | 71     |     
|            | Number of rooms      |                  |  |            |              |  |   | 12,803       |      |   |              | 12,803 |     |   |   | 12,803 |     
|            | Occupancy            |                  |  |            |              |  |   | 62.0         | %    |   |              | 61.3   | %   |   |   | 60.2   | %   
|            | Average daily rate   |                  |  |            |              |  | $ | 82.95        |      |   | $            | 77.59  |     |   | $ | 75.17  |     
|            | RevPAR               |                  |  |            |              |  | $ | 51.41        |      |   | $            | 47.54  |     |   | $ | 45.22  |     
|            |                      | RevPAR change    |  |            |              |  |   |              | 8.2  | % |              |        | 5.1 | % |   |        | (3.7 | )%





| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | Northeast: Canada, Connecticut, Massachusetts, Maryland, New
    Hampshire, New York, Ohio, Pennsylvania, Vermont, West Virginia;
|
| |  | Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, South
    Carolina, Tennessee;                                        
|
| |  | Midwest: Arkansas, Iowa, Indiana, Kansas, Michigan, Minnesota,
    Oklahoma, Texas; and                                          
|
| |  | West: Arizona, California, Colorado, New Mexico.                                                                                 



| |                   
| | ------------------
| | Hotel Encumbrances



|                                                |  |           |    |                   |                    |   |         |                 |  |   |         | 
|----------------------------------------------- |  | --------- | -- | ----------------- | ------------------ | - | ------- | --------------- |  | - | ------- | 
|                                                |  |           |    | December 31, 2005 |                   
|                                                |  |           |    |                   |                   
|                                                |  | Number    |    |                   | Property and       |   |         | Long-term       | 
|                                                |  | of Hotels |    |                   | Equipment, Net (1) |   |         | Obligations (1) | 
|                                                |  |           |    |                   |                    |   |         |                 | 
|                                                |  |           |    | ($ in thousands)  |                   
|Refinancing Debt                                |  |           |    |                   |                    |   |         |                 |  |   |         | 
|Merrill Lynch Mortgage Lending, Inc.  Floating |  |           | 19 |                   |                    | $ | 93,977  |                 |  | $ | 67,546  | 
|Merrill Lynch Mortgage Lending, Inc.  Fixed    |  |           | 34 |                   |                    |   | 333,825 |                 |  |   | 252,377 | 
|                                                |  |           |    |                   |                    |   |         |                 | 
|Merrill Lynch Mortgage Lending, Inc.  Total    |  |           | 53 |                   |                    |   | 427,802 |                 |  |   | 319,923 | 

17



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##### Table of Contents



|                                                              |  |           |    |                   |                    |   |         |                 |  |   |         |  
|------------------------------------------------------------- |  | --------- | -- | ----------------- | ------------------ | - | ------- | --------------- |  | - | ------- | -
|                                                              |  |           |    | December 31, 2005 |                   
|                                                              |  |           |    |                   |                   
|                                                              |  | Number    |    |                   | Property and       |   |         | Long-term       | 
|                                                              |  | of Hotels |    |                   | Equipment, Net (1) |   |         | Obligations (1) | 
|                                                              |  |           |    |                   |                    |   |         |                 | 
|                                                              |  |           |    | ($ in thousands)  |                   
|Other Financings                                              |  |           |    |                   |                    |   |         |                 |  |   |         |  
|Computer Share Trust Company of Canada                        |  |           | 1  |                   |                    |   | 16,260  |                 |  |   | 7,838   |  
|Column Financial, Inc.                                        |  |           | 7  |                   |                    |   | 51,603  |                 |  |   | 10,337  |  
|Lehman Brothers Holdings, Inc.                                |  |           | 5  |                   |                    |   | 58,161  |                 |  |   | 22,398  |  
|JP Morgan Chase Bank                                          |  |           | 2  |                   |                    |   | 6,019   |                 |  |   | 10,064  |  
|Wachovia                                                      |  |           | 2  |                   |                    |   | 13,525  |                 |  |   | 13,173  |  
|IXIS Real Estate Capital, Inc.                                |  |           | 1  |                   |                    |   | 15,378  |                 |  |   | 19,000  |  
|Column Financial, Inc.                                        |  |           | 1  |                   |                    |   | 11,357  |                 |  |   | 8,146   |  
|                                                              |  |           |    |                   |                    |   |         |                 | 
|Total  other financing                                       |  |           | 19 |                   |                    |   | 172,303 |                 |  |   | 90,956  |  
|                                                              |  |           |    |                   |                    |   |         |                 | 
|                                                              |  |           | 72 |                   |                    |   | 600,105 |                 |  |   | 410,879 |  
|Long-term liabilities  other                                 |  |           |    |                   |                    |   |         |                 |  |   |         |  
|Tax notes issued pursuant to our Joint Plan of Reorganization |  |           |   |                   |                    |   |        |                 |  |   | 2,220   |  
|Other                                                         |  |           |   |                   |                    |   |        |                 |  |   | 1,151   |  
|                                                              |  |           |    |                   |                    |   |         |                 | 
|                                                              |  |           |   |                   |                    |   |        |                 |  |   | 3,371   |  
|                                                              |  |           |    |                   |                    |   |         |                 | 
|Property and equipment  other                                |  |           | 5  |                   |                    |   | 20,554  |                 |  |   |        |  
|                                                              |  |           |    |                   |                    |   |         |                 | 
|                                                              |  |           | 77 |                   |                    |   | 620,659 |                 |  |   | 414,250 |  
|Held for sale                                                 |  |           | (3 | )                 |                    |   | (13,797 | )               |  |   | (1,287  | )
|                                                              |  |           |    |                   |                    |   |         |                 | 
|Total December 31, 2005(2)                                    |  |           | 74 |                   |                    | $ | 606,862 |                 |  | $ | 412,963 |  
|                                                              |  |           |    |                   |                    |   |         |                 | 






|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Debt obligations and property and equipment of one hotel in
    which we have a non-controlling equity interest that we do not
    consolidate are excluded from the table.
|   
|(2) | Debt obligations at December 31, 2005 include the current
    portion.                                                                                                     

Insurance






| |   |                                                 
| | - | ------------------------------------------------
| |  | general liability;                              
|
| |  | property damage including business interruption;
|
| |  | flood;                                          
|
| |  | directors and officers liability;             
|
| |  | liquor liability;                               
|
| |  | workers compensation;                          
|
| |  | fiduciary liability;                            
|
| |  | business automobile;                            
|
| |  | environmental; and                              
|
| |  | employment practices liability insurance.       



18



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##### Table of Contents









Regulation










Employees




Legal Proceedings




19



---



##### Table of Contents





SEC Filings and Financial Information


10-K, 10-Q, 8-K,


1-800-SEC-0330.


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 Iraq, 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 and land parcel
    dispositions;                                                                                                                  
|
| |  | Seasonality of the hotel business;                                                                                                                                                       
|
| |  | The effects of unpredictable weather events such as hurricanes;                                                                                                                          
|
| |  | 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 the majority of our assets being encumbered on our
    borrowings and future growth;                                                                                       

20



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##### Table of Contents





| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our ability to meet the continuing listing requirements of the
    Securities and Exchange Commission and the American Stock
    Exchange;                                                                        
|
| |  | 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 high energy costs, natural gas
    and gasoline prices; and                                                                                                                      
|
| |  | The risks identified below under Risks Related to Our
    Business and Risks Relating 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.







21



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                                                                                                                                                                                           
|
| |  | with regard to the Merrill Lynch Mortgage floating rate
    refinancing debt (Floating Rate Debt), either the
    termination of franchise agreements for more than two properties
    or the termination of franchise agreements for hotels whose
    allocated loan amounts represent more than 5% of the outstanding
    principal amount of the floating rate debt, and such hotels
    continue to operate for more than five consecutive days without
    being subject to replacement franchise agreements;
|
| |  | with regard to the Merrill Lynch Mortgage fixed rate refinancing
    debt (Fixed Rate 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.                                                                                                                                                                                                                                                                                                                                                       











| |                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Hotels require a high level of capital expenditures,
    maintenance and repairs, and if we are not able to meet these
    requirements of our hotels appropriately, our business and
    operating results will suffer.



22



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| |                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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);
|
| |  | 72 of our consolidated hotels are pledged as collateral for
    existing mortgage loans as of December 31, 2005, which
    represented 96.7% of the book value of our hotel property and
    equipment, net, as of December 31, 2005, and, 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                                                                                      
|
| |  | 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.

12-month 12-month


23



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| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Rising interest rates could have an adverse effect on our
    cash flow and interest expense.



24



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;                                                                                                                                                                                                                            
|
| |  | 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;         

25



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##### Table of Contents





| |   |                                                
| | - | -----------------------------------------------
| |  | our cash flow and cash needs; and              
|
| |  | the market price per share of our common stock.



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | If we are not able to implement our growth strategy, we
    may not be able to improve our financial performance.





| |                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our current joint venture investments could be adversely
    affected by our lack of sole decision-making authority, our
    reliance on joint venture partners financial condition and
    performance, and any disputes that may arise between us and our
    joint venture partners.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We have a history of significant losses and we may not be
    able to successfully improve our performance to achieve
    profitability.



26



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##### Table of Contents





| |                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | We may be unable to sell real estate, including our assets
    held for sale, in a timely manner or at expected prices.





| |                                                                           
| | --------------------------------------------------------------------------
| | 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 government 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.



27



---



##### Table of Contents







| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 and cash-rich 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.                                                                  



| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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);
|
| |  | we will not incur losses from risks that are not insurable or
    that are not economically insurable; or                                      
|
| |  | current coverages with AA- rated or better carriers will
    continue to be available at reasonable rates.                                     





| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | Competition in the lodging industry could have a material
    adverse effect on our business and results of operations.



28



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| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Adverse conditions in major metropolitan markets in which
    we do substantial business could negatively affect our results
    of operations.





| |                                  
| | ---------------------------------
| | The lodging business is seasonal.





| |                                                              
| | -------------------------------------------------------------
| | We are exposed to potential risks of brand
    concentration.





| |                                                                           
| | --------------------------------------------------------------------------
| | We have experienced significant changes in our senior
    management team.





| |                                                                                     
| | ------------------------------------------------------------------------------------
| | 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.



29



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| |                                                                             
| | ----------------------------------------------------------------------------
| | We may 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.





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Costs of compliance with environmental laws and
    regulations could adversely affect operating results.











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| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



Risks Related to Our Common Stock




| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | Our common stock could be de-listed from the American
    Stock Exchange if its listing standards are not
    maintained.





| |                                 
| | --------------------------------
| | 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;                                                                                                                                               

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| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | 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








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








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



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Historical Data




Over-the Over-the


|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | 2004 |      
|               |  |      |      
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|First Quarter  |  | $    | 23.94 |  |     | $ | 15.60 | 
|Second Quarter |  |      | 18.60 |  |     |   | 10.50 | 
|Third Quarter  |  |      | 10.55 |  |     |   | 9.60  | 
|Fourth Quarter |  |      | 12.35 |  |     |   | 9.70  | 

|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | 2005 |      
|               |  |      |      
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|First Quarter  |  | $    | 12.03 |  |     | $ | 10.25 | 
|Second Quarter |  |      | 11.06 |  |     |   | 8.39  | 
|Third Quarter  |  |      | 10.60 |  |     |   | 10.02 | 
|Fourth Quarter |  |      | 10.75 |  |     |   | 9.81  | 

|                                    |  |      |       |  |     |   |       | 
|----------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|                                    |  | 2006 |      
|                                    |  |      |      
|                                    |  | High |       |  | Low |  
|                                    |  |      |       |  |     |  
|First Quarter (up to March 1, 2006) |  | $    | 13.35 |  |     | $ | 10.69 | 









33



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##### Table of Contents







Equity Compensation Plan Information




|                                                           |  |                   |         |  |                   |           |                      |                      |  |  |           | 
|---------------------------------------------------------- |  | ----------------- | ------- |  | ----------------- | --------- | -------------------- | -------------------- |  |  | --------- | 
|                                                           |  |                   |         |  |                   | Number of |                     
|                                                           |  | Number of         |         |  |                   |           | Securities Remaining |                     
|                                                           |  | Securities to be  |         |  | Weighted-average  |           |                      | Available for Future | 
|                                                           |  | Issued Upon       |         |  | Exercise Price of |           |                      | Issuance Under       | 
|                                                           |  | Exercise          |         |  | Outstanding       |           |                      | Equity Compensation  | 
|                                                           |  | of Outstanding    |         |  | Options,          |           |                      | Plans (Excluding     | 
|                                                           |  | Options, Warrants |         |  | Warrants and      |           |                      | Securities Reflected | 
|                                                           |  | and Rights        |         |  | Rights            |           |                      | in Column (a))       | 
|                                                           |  | (a)               |         |  | (b)               |           |                      | (c)                  | 
|                                                           |  |                   |         |  |                   |           |                      |                      | 
|Equity compensation plans approved by security holders     |  |                   | 593,894 |  |                   | $         | 10.41                |                      |  |  | 2,545,252 | 
|Equity compensation plans not approved by security holders |  |                   |        |  |                   |           |                     |                      |  |  |          | 



34



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##### Table of Contents





|                                                                       |  |                |          |   |      |                  |                |  |           | 
|---------------------------------------------------------------------- |  | -------------- | -------- | - | ---- | ---------------- | -------------- |  | --------- | 
|                                                                       |  |                |          |   |      | Available for    |               
|                                                                       |  | Issued Under   |          |   |      |                  | Issuance Under | 
|                                                                       |  | the Stock      |          |   |      |                  | the Stock      | 
|                                                                       |  | Incentive Plan |          |   | Type |                  | Incentive Plan | 
|                                                                       |  |                |          |   |      |                  |                | 
|Available under the plan, less previously issued                       |  |                |          |   |      |                  |                |  | 2,713,314 | 
|Issued  January 31, 2005                                              |  |                | 25,000   |   |      | stock options    |                |  | 2,688,314 | 
|Issued  February 28, 2005                                             |  |                | 7,500    |   |      | stock options    |                |  | 2,680,814 | 
|Issued  April 18, 2005                                                |  |                | 2,500    |   |      | stock options    |                |  | 2,678,314 | 
|Issued  May 9, 2005                                                   |  |                | 392,500  |   |      | stock options    |                |  | 2,285,814 | 
|Issued  July 15, 2005                                                 |  |                | 75,000   |   |      | restricted stock |                |  | 2,210,814 | 
|Issued  September 8, 2005                                             |  |                | 2,500    |   |      | stock options    |                |  | 2,208,314 | 
|Issued  September 26, 2005                                            |  |                | 5,000    |   |      | stock options    |                |  | 2,203,314 | 
|Issued  December 29, 2005                                             |  |                | 5,000    |   |      | stock options    |                |  | 2,198,314 | 
|Options forfeited in 2005                                              |  |                | (332,516 | ) |      |                  |                |  | 2,530,830 | 
|Shares withheld from awards to satisfy tax withholding
    obligations |  |                | (14,422  | ) |      |                  |                |  | 2,545,252 | 
|                                                                       |  |                |          |   |      |                  |                | 
|                                                                       |  |                | 168,062  |   |      |                  |                |  |           | 
|                                                                       |  |                |          |   |      |                  |                | 






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

Selected Consolidated Financial Data






10-K.


10-K, F-1.


35



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|                                                                                                         |                                                                                                          |                                         |         |                 |             |   |               |       |   |   |         |        |   |      |         |       |      |   |         |       |   |   |          |       |  
|-------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------- | --------------- | ----------- | - | ------------- | ----- | - | - | ------- | ------ | - | ---- | ------- | ----- | ---- | - | ------- | ----- | - | - | -------- | ----- | -
|                                                                                                         |                                                                                                          | ($ in thousands, except per share data) |        
|                                                                                                         |                                                                                                          | Successor                               |         |                 | Predecessor |  
|                                                                                                         |                                                                                                          |                                         |         |                 |             |  
|                                                                                                         |                                                                                                          |                                         |         | November 23,    |             |   | January 1, to |       |   |  
|                                                                                                         |                                                                                                          |                                         |         | to December 31, |             |   | November 22,  |       |   |  
|                                                                                                         |                                                                                                          | 2005                                    |         |                 | 2004        |   |               | 2003  |   |   | 2002    |        |   | 2002 |         |       | 2001 |  
|                                                                                                         |                                                                                                          |                                         |         |                 |             |   |               |       |   |   |         |        |   |      |         |       |      |  
|Income statement data:                                                                                   |                                                                                                          |                                         |         |                 |             |   |               |       |   |   |         |        |   |      |         |       |      |   |         |       |   |   |          |      
|Revenues  continuing operations                                                                         |                                                                                                          | $                                       | 319,264 |                 |             | $ | 312,425       |       |   | $ | 301,398 |        |   | $    | 24,273  |       |      | $ | 288,802 |       |   | $ | 338,235  |      
|Revenues  discontinued operations                                                                       |                                                                                                          |                                         | 20,963  |                 |             |   | 47,883        |       |   |   | 71,153  |        |   |      | 7,475   |       |      |   | 89,220  |       |   |   | 109,321  |      
|Revenues  continuing and discontinued operations                                                        |                                                                                                          |                                         | 340,227 |                 |             |   | 360,308       |       |   |   | 372,551 |        |   |      | 31,748  |       |      |   | 378,022 |       |   |   | 447,556  |      
|Income (loss)  continuing operations                                                                    |                                                                                                          |                                         | 10,449  |                 |             |   | (31,537       | )     |   |   | (21,765 | )      |   |      | (6,704  | )     |      |   | (84,321 | )     |   |   | (87,782  | )    
|Income (loss)  discontinued operations                                                                  |                                                                                                          |                                         | 1,852   |                 |             |   | (297          | )     |   |   | (9,912  | )      |   |      | (2,644  | )     |      |   | 96,709  |       |   |   | (54,982  | )    
|Net income (loss)                                                                                        |                                                                                                          |                                         | 12,301  |                 |             |   | (31,834       | )     |   |   | (31,677 | )      |   |      | (9,348  | )     |      |   | 12,388  |       |   |   | (142,764 | )    
|Net (loss) income attributable to common stock                                                           |                                                                                                          |                                         | 12,301  |                 |             |   | (31,834       | )     |   |   | (39,271 | )      |   |      | (10,858 | )     |      |   | 12,388  |       |   |   | (142,764 | )    
|(Loss) income from continuing operations attributable to common
    stock before discontinued operations |                                                                                                          |                                         | 10,449  |                 |             |   | (31,537       | )     |   |   | (29,359 | )      |   |      | (8,214  | )     |      |   | (84,321 | )     |   |   | (87,782  | )    
|Basic earnings (loss) per common share:                                                                  |                                                                                                          |                                         |         |                 |             |   |               |       |   |   |         |        |   |      |         |       |      |   |         |       |   |   |          |      
|                                                                                                         | Income (loss)  continuing operations                                                                    |                                         |         | 0.42            |             |   |               | (2.28 | ) |   |         | (9.33  | ) |      |         | 2.88  |      |   |         | (2.96 | ) |   |          | (3.10 | )
|                                                                                                         | Income (loss)  discontinued operations, net of taxes                                                    |                                         |         | 0.08            |             |   |               | (0.02 | ) |   |         | (4.25  | ) |      |         | (1.13 | )    |   |         | 3.39  |   |   |          | (1.94 | )
|                                                                                                         | Net income (loss)                                                                                        |                                         |         | 0.50            |             |   |               | (2.30 | ) |   |         | (13.58 | ) |      |         | (4.01 | )    |   |         | 0.43  |   |   |          | (5.04 | )
|                                                                                                         | Net income (loss) attributable to common stock                                                           |                                         |         | 0.50            |             |   |               | (2.30 | ) |   |         | (16.83 | ) |      |         | (4.65 | )    |   |         | 0.43  |   |   |          | (5.04 | )
|                                                                                                         | Income (loss) from continuing operations attributable to common
    stock before discontinued operations |                                         |         | 0.42            |             |   |               | (2.28 | ) |   |         | (12.58 | ) |      |         | (3.52 | )    |   |         | (2.96 | ) |   |          | (3.10 | )
|Diluted earnings (loss) per common share:                                                                |                                                                                                          |                                         |         |                 |             |   |               |       |   |   |         |        |   |      |         |       |      |   |         |       |   |   |          |      
|                                                                                                         | Income (loss)  continuing operations                                                                    |                                         |         | 0.42            |             |   |               | (2.28 | ) |   |         | (9.33  | ) |      |         | (2.88 | )    |   |         | (2.96 | ) |   |          | (3.10 | )
|                                                                                                         | Income (loss)  discontinued operations, net of taxes                                                    |                                         |         | 0.08            |             |   |               | (0.02 | ) |   |         | (4.25  | ) |      |         | (1.13 | )    |   |         | 3.39  |   |   |          | (1.94 | )
|                                                                                                         | Net income (loss)                                                                                        |                                         |         | 0.50            |             |   |               | (2.30 | ) |   |         | (13.58 | ) |      |         | (4.01 | )    |   |         | 0.43  |   |   |          | (5.04 | )
|                                                                                                         | Net income (loss) attributable to common stock                                                           |                                         |         | 0.50            |             |   |               | (2.30 | ) |   |         | (16.83 | ) |      |         | (4.65 | )    |   |         | 0.43  |   |   |          | (5.04 | )
|                                                                                                         | Income (loss) from continuing operations attributable to common
    stock before discontinued operations |                                         |         | 0.42            |             |   |               | (2.28 | ) |   |         | (12.58 | ) |      |         | (3.52 | )    |   |         | (2.96 | ) |   |          | (3.10 | )

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|                                                                         |  |                                         |         |                 |             |   |               |      |  |   |         |  |  |      |         |  |      |   |         |   |  |   |         |  
|------------------------------------------------------------------------ |  | --------------------------------------- | ------- | --------------- | ----------- | - | ------------- | ---- |  | - | ------- |  |  | ---- | ------- |  | ---- | - | ------- | - |  | - | ------- | -
|                                                                         |  | ($ in thousands, except per share data) |        
|                                                                         |  | Successor                               |         |                 | Predecessor |  
|                                                                         |  |                                         |         |                 |             |  
|                                                                         |  |                                         |         | November 23,    |             |   | January 1, to |      |  |  
|                                                                         |  |                                         |         | to December 31, |             |   | November 22,  |      |  |  
|                                                                         |  | 2005                                    |         |                 | 2004        |   |               | 2003 |  |   | 2002    |  |  | 2002 |         |  | 2001 |  
|                                                                         |  |                                         |         |                 |             |   |               |      |  |   |         |  |  |      |         |  |      |  
|Basic weighted average shares(1)                                         |  |                                         | 24,576  |                 |             |   | 13,817        |      |  |   | 2,333   |  |  |      | 2,333   |  |      |   | 28,480  |   |  |   | 28,350  |  
|Diluted weighted average shares(1)                                       |  |                                         | 24,630  |                 |             |   | 13,817        |      |  |   | 2,333   |  |  |      | 2,333   |  |      |   | 28,480  |   |  |   | 28,350  |  
|Balance sheet data (at period end):                                      |  |                                         |         |                 |             |   |               |      |  |   |         |  |  |      |         |  |      |   |         |   |  |   |         |  
|Total assets                                                             |  | $                                       | 726,685 |                 |             | $ | 723,648       |      |  | $ | 709,460 |  |  | $    | 762,263 |  |      | $ | 967,489 |   |  | $ | 975,765 |  
|Assets held for sale                                                     |  |                                         | 14,866  |                 |             |   | 30,559        |      |  |   | 68,617  |  |  |      | 44      |  |      |   | 129     |   |  |   | 160     |  
|Long-term debt                                                           |  |                                         | 394,432 |                 |             |   | 393,143       |      |  |   | 551,292 |  |  |      | 389,752 |  |      |   | 7,215   |   |  |   | 7,652   |  
|Liabilities related to assets held for sale                              |  |                                         | 4,610   |                 |             |   | 30,572        |      |  |   | 57,998  |  |  |      | 44      |  |      |   | 129     |   |  |   | 160     |  
|Liabilities subject to compromise                                        |  |                                         |        |                 |             |   |              |      |  |   |        |  |  |      | 93,816  |  |      |   | 926,387 |   |  |   | 925,894 |  
|Mandatorily redeemable 12.25% cumulative Series A preferred
    stock(2) |  |                                         |        |                 |             |   |              |      |  |   |        |  |  |      | 126,510 |  |      |   |        |   |  |   |        |  
|Total liabilities                                                        |  |                                         | 466,424 |                 |             |   | 495,385       |      |  |   | 666,534 |  |  |      | 553,680 |  |      |   | 991,040 |   |  |   | 982,446 |  
|Total liabilities and preferred stock                                    |  |                                         | 466,424 |                 |             |   | 495,385       |      |  |   | 666,534 |  |  |      | 680,190 |  |      |   | 991,040 |   |  |   | 982,446 |  
|Total stockholders equity (deficit)                                     |  |                                         | 249,044 |                 |             |   | 226,634       |      |  |   | 40,606  |  |  |      | 78,457  |  |      |   | (28,841 | ) |  |   | (6,681  | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The number of shares in the Successor period ended
    December 31, 2002, represents the new shares issued on the
    effective date of the plan of reorganization in
    November 25, 2002. The 28,479,837 old shares were cancelled
    and 2,333,333 million new shares (on a post reverse stock
    split basis) were issued, including the shares held in the
    disputed claims reserve.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(2) | The Preferred Stock was issued on November 25, 2002. At
    December 31, 2002, the Preferred Stock was classified
    between long-term debt and equity on the Consolidated Balance
    Sheet, called the mezzanine section. In accordance with
    Statement of Financial Accounting Standards (SFAS)
    No. 150 which was effective on July 1, 2003, we
    reclassified the Preferred Stock to long-term debt. The
    Preferred Stock outstanding at December 31, 2003 was
    $142.2 million, compared to $126.5 million at
    December 31, 2002. In addition, dividends for the
    applicable periods from July 1, 2003 to June 30, 2004
    were reported in interest expense. In accordance with
    SFAS No. 150, we continued to show the dividends for
    the periods from January 1, 2003 to June 30, 2003 and
    from November 23, 2002 to December 31, 2002 as
    deductions from retained earnings. On June 25, 2004, we
    exchanged 3,941,115 shares of our common stock for
    1,483,558 shares of our outstanding Preferred Stock, and,
    on July 26, 2004, we used a portion of the proceeds of our
    public offering of common stock to redeem the remaining
    4,048,183 shares of outstanding Preferred Stock.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|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.


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Executive Summary






| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | 71 hotels that we wholly own and operate through
    subsidiaries; and                                                   
|
| |  | four hotels that we operate in joint ventures in which we have a
    50% or greater equity interest and exercise control.





| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | renovating and repositioning certain of our existing hotels to
    improve performance;                                    
|
| |  | divesting hotels that do not fit this strategy or that are
    unlikely to do so without significant effort or expense; and
|
| |  | acquiring one hotel that better fits this strategy.                                                                        



|                                                 |  |            |    |   |              |  |   |       |  |  |    |  
|------------------------------------------------ |  | ---------- | -- | - | ------------ |  | - | ----- |  |  | -- | -
|                                                 |  | Continuing |    |   | Discontinued |  |   |      
|                                                 |  | Operations |    |   | Operations   |  |   | Total | 
|                                                 |  |            |    |   |              |  |   |       | 
|Hotel count in portfolio as of December 31, 2005 |  |            | 75 |   |              |  | 3 |       |  |  | 78 |  
|Hotels identified for sale in first quarter 2006 |  |            | (5 | ) |              |  | 5 |       |  |  | 0  |  
|Two Kansas hotels surrendered to Trustee         |  |            | (2 | ) |              |  |  |       |  |  | (2 | )
|Columbus hotel deeded to lender                  |  |            | (1 | ) |              |  |  |       |  |  | (1 | )
|                                                 |  |            |    |   |              |  |   |       | 
|Hotel count in portfolio as of March 1, 2006     |  |            | 67 |   |              |  | 8 |       |  |  | 75 |  
|                                                 |  |            |    |   |              |  |   |       | 

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Operating Summary






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenues increased in 2005 due to improved performance in
    occupancy and ADR, mostly driven by increases in room rate.
    Revenues for 2005 were negatively affected by the rooms that
    were displaced by our renovation program, the impact of two
    hotels that were closed for the balance of 2005 for hurricane
    repairs (with the exception of the Crowne Plaza West Palm Beach
    that reopened on December 29, 2005), and the closure of one
    hotel in the fourth quarter 2005 for repairs related to a water
    main break;                                                                                            
|
| |  | Direct operating expenses increased due to increased revenues
    and the corresponding increase in variable expenses such as
    franchise fees which increase with revenues. Other hotel
    operating costs increased due to data conversion and training
    costs for property management system upgrades mandated by our
    franchisors, higher bad debts related to airline Chapter 11
    filings, higher advertising and promotion costs related to our
    newly renovated properties including our two hurricane damaged
    properties that reopened in December 2005 and January 2006, and
    significantly higher utility rates;
|
| |  | Corporate and other expenses were higher in 2005 due to
    severance costs, expenses related to the hiring of the
    Companys president and chief executive officer, the
    write-off of a receivable from and the investment in the 30%
    minority-owned Holiday Inn City Center Columbus, OH hotel, and
    legal and settlement fees surrounding the two Kansas hotels that
    were surrendered to the bond Trustee;                                                                                                                                                                                                                  
|
| |  | During 2005, we reached a settlement with our insurance carriers
    on the property damage related to the 2004 hurricane season and,
    as a result, recognized a net casualty gain on five hotels
    offset by additional hurricane expenses at our Radisson New
    Orleans Airport Hotel and other continuing operations hotels. We
    also recognized business interruption proceeds for the two
    Florida hotels that were closed for hurricane repairs;                                                                                                                                                                             
|
| |  | Interest expense decreased in 2005 as compared to 2004 because
    we incurred significant charges related to the refinancing
    executed in connection with our secondary stock offering
    completed on June 25, 2004; and                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | During 2005, we analyzed our assets held for use for conditions
    of impairment and, where appropriate, recorded impairment
    charges where the carrying values exceeded their estimated fair
    values. Our analysis included such factors as cash flow,
    negative demographic or economic factors in each market and
    increased guest room supply in each market.                                                                                                                                                                                                                                                                  

Discontinued Operations










39



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Critical Accounting Policies and Estimates




Consolidation policy






Deferral policy


Asset impairment


40



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##### Table of Contents











| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | 1. Management commits to a plan to sell the asset;                                         
|
| | 2. The asset is available for immediate sale in its present
    condition;                 
|
| | 3. An active marketing plan to sell the asset has been
    initiated at a reasonable price;
|
| | 4. The sale of the asset is probable within one
    year; and                              
|
| | 5. It is unlikely that significant changes to the plan to
    sell the asset will be made. 





Accrual of self-insured obligations


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##### 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.                                    





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##### Table of Contents





| |                   
| | ------------------
| | Operating expenses





| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Direct 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;



| |   |                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 repair costs and charges related to the assets
    written off that were damaged during the 2004 and 2005 hurricane
    seasons, netted again any gains realized on the final settlement
    of our 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-term assets
    to their fair values on assets where the 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 proceeds from
    our insurance company for lost profits as a result of a business
    shutdown. Our 2005 business interruption proceeds relate to the
    recovery of lost profits and reimbursement for additional
    expenses incurred as a result of hurricane damage sustained
    during the 2004 hurricane season;
|
| |  | Interest expense and other financing costs includes preferred
    stock dividend, interest expense which includes amortization of
    deferred loan costs, and loss on preferred stock redemption;                                                                                                                                                                           
|
| |  | Interest income;                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Our 30% share of the income or loss of our non-controlling
    equity interest in one hotel, for which we account under the
    equity method of accounting for 2004 and prior years but which
    we wrote off in 2005 as the hotel was surrendered to the lender
    on November 15, 2005; and                                                                             
|
| |  | Minority interests  our equity partners share
    of the income or loss of the four hotels owned by joint ventures
    that we consolidate.                                                                                                                                                                                                                                

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Results of Operations  Continuing Operations




| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Results of operations for the twelve months ended
    December 31, 2005 and December 31, 2004



| |                                 
| | --------------------------------
| | Revenues  Continuing Operations

|          |                   |      |       |         |      |   |       |                     |  |   |      |        |   |  |     |      |   
|--------- | ----------------- | ---- | ----- | ------- | ---- | - | ----- | ------------------- |  | - | ---- | ------ | - |  | --- | ---- | --
|          |                   | 2005 |       |         | 2004 |   |       | Increase (decrease) | 
|          |                   |      |       |         |      |   |       |                     | 
|          | Rooms             |      | $     | 241,441 |      |   | $     | 231,255             |  |   | $    | 10,186 |   |  |     | 4.4  | % 
|          | Food and beverage |      |       | 67,715  |      |   |       | 70,631              |  |   |      | (2,916 | ) |  |     | (4.1 | )%
|          | Other             |      |       | 10,108  |      |   |       | 10,539              |  |   |      | (431   | ) |  |     | (4.1 | )%
|          |                   |      |       |         |      |   |       |                     |  |   |      |       
|          | Total revenues    |      | $     | 319,264 |      |   | $     | 312,425             |  |   | $    | 6,839  |   |  |     | 2.2  | % 
|          |                   |      |       |         |      |   |       |                     |  |   |      |       
|Occupancy |                   |      | 62.0  | %       |      |   | 61.5  | %                   |  |   |      |        |   |  | 0.8 | %   
|ADR       |                   | $    | 82.92 |         |      | $ | 78.00 |                     |  | $ | 4.92 |        |   |  | 6.3 | %   
|RevPAR    |                   | $    | 51.37 |         |      | $ | 47.96 |                     |  | $ | 3.41 |        |   |  | 7.1 | %   







44



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##### Table of Contents





|            |    |  |            |  |        |                     |  |                                                                                                                                                                                                              |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       | 
|----------- | -- |  | ---------- |  | ------ | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ---------- | - |  | ------ | ----- | - | -------- | - | ---- |  |  |  | ----- | 
|            |    |  |            |  |        | Twelve Months Ended |  |                                                                                                                                                                                                              |  |   |           
|            |    |  |            |  |        |                     |  |                                                                                                                                                                                                              |  |   |           
|Hotel Count |    |  | Room Count |  |        |                     |  | 12/31/2005                                                                                                                                                                                                   |  |   | 12/31/2004 |   |  | Change |       |   | % Change |  
|            |    |  |            |  |        |                     |  |                                                                                                                                                                                                              |  |   |            |   |  |        |       |   |          |  
|            | 74 |  |            |  | 13,401 |                     |  | All Continuing Operations                                                                                                                                                                                    |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       | 
|            |    |  |            |  |        |                     |  | Occupancy                                                                                                                                                                                                    |  |   | 62.0       | % |  |        | 61.5  | % |          |   |      |  |  |  | 0.8%  | 
|            |    |  |            |  |        |                     |  | ADR                                                                                                                                                                                                          |  | $ | 82.92      |   |  | $      | 78.00 |   |          | $ | 4.92 |  |  |  | 6.3%  | 
|            |    |  |            |  |        |                     |  | RevPAR                                                                                                                                                                                                       |  | $ | 51.37      |   |  | $      | 47.96 |   |          | $ | 3.41 |  |  |  | 7.1%  | 
|            | 72 |  |            |  | 12,910 |                     |  | Continuing Operations less two hotels closed due to hurricane
    damage                                                                                                                                     |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       | 
|            |    |  |            |  |        |                     |  | Occupancy                                                                                                                                                                                                    |  |   | 62.0       | % |  |        | 61.3  | % |          |   |      |  |  |  | 1.1%  | 
|            |    |  |            |  |        |                     |  | ADR                                                                                                                                                                                                          |  | $ | 82.92      |   |  | $      | 77.59 |   |          | $ | 5.33 |  |  |  | 6.9%  | 
|            |    |  |            |  |        |                     |  | RevPAR                                                                                                                                                                                                       |  | $ | 51.37      |   |  | $      | 47.54 |   |          | $ | 3.83 |  |  |  | 8.1%  | 
|            |    |  |            |  |        |                     |  | RevPAR Index                                                                                                                                                                                                 |  |   | 97.7       | % |  |        | 97.7  | % |          |   |      |  |  |  | 0.0%  | 
|            | 48 |  |            |  | 8,981  |                     |  | Continuing Operations less two hotels closed due to hurricane
    damage, one closed due to water damage and hotels under
    renovation in the first, second, third or fourth quarters of
    2004 and 2005 |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       | 
|            |    |  |            |  |        |                     |  | Occupancy                                                                                                                                                                                                    |  |   | 61.0       | % |  |        | 60.0  | % |          |   |      |  |  |  | 1.7%  | 
|            |    |  |            |  |        |                     |  | ADR                                                                                                                                                                                                          |  | $ | 80.43      |   |  | $      | 76.12 |   |          | $ | 4.31 |  |  |  | 5.7%  | 
|            |    |  |            |  |        |                     |  | RevPAR                                                                                                                                                                                                       |  | $ | 49.07      |   |  | $      | 45.65 |   |          | $ | 3.42 |  |  |  | 7.5%  | 
|            |    |  |            |  |        |                     |  | RevPAR Index                                                                                                                                                                                                 |  |   | 97.8       | % |  |        | 97.4  | % |          |   |      |  |  |  | 0.4%  | 
|            | 21 |  |            |  | 3,013  |                     |  | Hotels completing major renovations in 2003 and 2004                                                                                                                                                         |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       | 
|            |    |  |            |  |        |                     |  | Occupancy                                                                                                                                                                                                    |  |   | 69.9       | % |  |        | 65.1  | % |          |   |      |  |  |  | 7.4%  | 
|            |    |  |            |  |        |                     |  | ADR                                                                                                                                                                                                          |  | $ | 88.75      |   |  | $      | 83.29 |   |          | $ | 5.46 |  |  |  | 6.6%  | 
|            |    |  |            |  |        |                     |  | RevPAR                                                                                                                                                                                                       |  | $ | 61.99      |   |  | $      | 54.19 |   |          | $ | 7.80 |  |  |  | 14.4% | 
|            |    |  |            |  |        |                     |  | RevPAR Index                                                                                                                                                                                                 |  |   | 107.0      | % |  |        | 102.6 | % |          |   |      |  |  |  | 4.3%  | 
|            | 15 |  |            |  | 1,740  |                     |  | Marriott Hotels                                                                                                                                                                                              |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       | 
|            |    |  |            |  |        |                     |  | Occupancy                                                                                                                                                                                                    |  |   | 71.0       | % |  |        | 67.7  | % |          |   |      |  |  |  | 4.9%  | 
|            |    |  |            |  |        |                     |  | ADR                                                                                                                                                                                                          |  | $ | 90.40      |   |  | $      | 85.07 |   |          | $ | 5.33 |  |  |  | 6.3%  | 
|            |    |  |            |  |        |                     |  | RevPAR                                                                                                                                                                                                       |  | $ | 64.02      |   |  | $      | 57.60 |   |          | $ | 6.42 |  |  |  | 11.1% | 
|            |    |  |            |  |        |                     |  | RevPAR Index                                                                                                                                                                                                 |  |   | 117.3      | % |  |        | 115.2 | % |          |   |      |  |  |  | 1.8%  | 
|            | 4  |  |            |  | 777    |                     |  | Hilton Hotels                                                                                                                                                                                                |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       | 
|            |    |  |            |  |        |                     |  | Occupancy                                                                                                                                                                                                    |  |   | 66.9       | % |  |        | 64.3  | % |          |   |      |  |  |  | 4.0%  | 
|            |    |  |            |  |        |                     |  | ADR                                                                                                                                                                                                          |  | $ | 96.59      |   |  | $      | 91.35 |   |          | $ | 5.24 |  |  |  | 5.7%  | 
|            |    |  |            |  |        |                     |  | RevPAR                                                                                                                                                                                                       |  | $ | 64.61      |   |  | $      | 58.74 |   |          | $ | 5.87 |  |  |  | 10.0% | 
|            |    |  |            |  |        |                     |  | RevPAR Index                                                                                                                                                                                                 |  |   | 97.0       | % |  |        | 93.5  | % |          |   |      |  |  |  | 3.7%  | 

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|            |    |  |            |  |       |                     |  |                                                                                               |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       |  
|----------- | -- |  | ---------- |  | ----- | ------------------- |  | --------------------------------------------------------------------------------------------- |  | - | ---------- | - |  | ------ | ----- | - | -------- | - | ---- |  |  |  | ----- | -
|            |    |  |            |  |       | Twelve Months Ended |  |                                                                                               |  |   |           
|            |    |  |            |  |       |                     |  |                                                                                               |  |   |           
|Hotel Count |    |  | Room Count |  |       |                     |  | 12/31/2005                                                                                    |  |   | 12/31/2004 |   |  | Change |       |   | % Change |  
|            |    |  |            |  |       |                     |  |                                                                                               |  |   |            |   |  |        |       |   |          |  
|            | 44 |  |            |  | 8,722 |                     |  | IHG Hotels less two hotels closed due to hurricane damage and
    one closed for water damage |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       |  
|            |    |  |            |  |       |                     |  | Occupancy                                                                                     |  |   | 61.9       | % |  |        | 62.5  | % |          |   |      |  |  |  | (1.0% | )
|            |    |  |            |  |       |                     |  | ADR                                                                                           |  | $ | 81.66      |   |  | $      | 76.92 |   |          | $ | 4.74 |  |  |  | 6.2%  |  
|            |    |  |            |  |       |                     |  | RevPAR                                                                                        |  | $ | 50.53      |   |  | $      | 48.07 |   |          | $ | 2.46 |  |  |  | 5.1%  |  
|            |    |  |            |  |       |                     |  | RevPAR Index                                                                                  |  |   | 94.6       | % |  |        | 96.4  | % |          |   |      |  |  |  | (1.9% | )
|            | 8  |  |            |  | 1,512 |                     |  | Other Brands and Independent Hotels(A)                                                        |  |   |            |   |  |        |       |   |          |   |      |  |  |  |       |  
|            |    |  |            |  |       |                     |  | Occupancy                                                                                     |  |   | 48.5       | % |  |        | 44.5  | % |          |   |      |  |  |  | 9.0%  |  
|            |    |  |            |  |       |                     |  | ADR                                                                                           |  | $ | 72.42      |   |  | $      | 63.47 |   |          | $ | 8.95 |  |  |  | 14.1% |  
|            |    |  |            |  |       |                     |  | RevPAR                                                                                        |  | $ | 35.10      |   |  | $      | 28.27 |   |          | $ | 6.83 |  |  |  | 24.2% |  
|            |    |  |            |  |       |                     |  | RevPAR Index                                                                                  |  |   | 91.9       | % |  |        | 81.2  | % |          |   |      |  |  |  | 13.2% |  





RevPAR in Markets in Which Lodgian Operates


|                 |    |  |         |  |             |           |  |  |          |   |  |              |     |   |  |  |       |  
|---------------- | -- |  | ------- |  | ----------- | --------- |  |  | -------- | - |  | ------------ | --- | - |  |  | ----- | -
|Markets in which |    |  |         |  |             |           |  |  |         
|Lodgian Operates |    |  |         |  |             |           |  |  | Comp     |  
|(A)              |    |  | Quarter |  |             | Comp Sets |  |  | Industry |   |  | Set/Industry |    
|                 |    |  |         |  |             |           |  |  |          |   |  |              |    
|                 | 71 |  |         |  | 1st Qtr 04 |           |  |  | 4.5      | % |  |              | 7.7 | % |  |  | 58.4  | %
|                 | 71 |  |         |  | 2nd Qtr 04 |           |  |  | 5.6      | % |  |              | 8.6 | % |  |  | 65.1  | %
|                 | 71 |  |         |  | 3rd Qtr 04 |           |  |  | 5.2      | % |  |              | 6.4 | % |  |  | 81.3  | %
|                 | 71 |  |         |  | 4th Qtr 04 |           |  |  | 7.6      | % |  |              | 8.4 | % |  |  | 90.5  | %
|                 | 71 |  |         |  | 1st Qtr 05 |           |  |  | 6.3      | % |  |              | 7.2 | % |  |  | 87.5  | %
|                 | 71 |  |         |  | 2nd Qtr 05 |           |  |  | 8.1      | % |  |              | 8.3 | % |  |  | 97.6  | %
|                 | 71 |  |         |  | 3rd Qtr 05 |           |  |  | 8.4      | % |  |              | 8.3 | % |  |  | 101.2 | %
|                 | 69 |  |         |  | 4th Qtr 05 |           |  |  | 10.0     | % |  |              | 9.9 | % |  |  | 101.0 | %






| |     |                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | The 69 hotels in the 4th quarter 2005 include the 75 hotels
    in our continuing operations portfolio less the hotels in West
    Palm Beach; Melbourne; Windsor, Canada; Pinehurst; Clarksburg
    and Columbus.



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| |                                                      
| | -----------------------------------------------------
| | Direct operating expenses  Continuing
    Operations

|                                |  |      |         |                  |      |   |         |                     |  |   |        |   |  |  |      |   
|------------------------------- |  | ---- | ------- | ---------------- | ---- | - | ------- | ------------------- |  | - | ------ | - |  |  | ---- | --
|                                |  | 2005 |         |                  | 2004 |   |         | Increase (decrease) | 
|                                |  |      |         |                  |      |   |         |                     | 
|                                |  |      |         | ($ in thousands) |      |   |        
|Direct operating expenses:      |  |      |         |                  |      |   |         |                     |  |   |        |   |  |  |      |   
|Rooms                           |  | $    | 67,344  |                  |      | $ | 65,019  |                     |  | $ | 2,325  |   |  |  | 3.6  | % 
|Food and beverage               |  |      | 48,710  |                  |      |   | 49,966  |                     |  |   | (1,256 | ) |  |  | (2.5 | )%
|Other                           |  |      | 8,050   |                  |      |   | 7,907   |                     |  |   | 143    |   |  |  | 1.8  | % 
|                                |  |      |         |                  |      |   |         |                     |  |   |        |  
|Total direct operating expenses |  | $    | 124,104 |                  |      | $ | 122,892 |                     |  | $ | 1,212  |   |  |  | 1.0  | % 
|                                |  |      |         |                  |      |   |         |                     |  |   |        |  
|% of total revenues             |  |      | 38.9    | %                |      |   | 39.3    | %                   |  |   |        |   |  |  |      |   







47



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| |                                                 
| | ------------------------------------------------
| | Other operating expenses  Continuing Operations

|                                               |                            |                  |         |        |      |   |         |                     |  |   |         |       |  |  |          |       |  
|---------------------------------------------- | -------------------------- | ---------------- | ------- | ------ | ---- | - | ------- | ------------------- |  | - | ------- | ----- |  |  | -------- | ----- | -
|                                               |                            | 2005             |         |        | 2004 |   |         | Increase (decrease) | 
|                                               |                            |                  |         |        |      |   |         |                     | 
|                                               |                            | ($ in thousands) |        
|Other operating expenses:                      |                            |                  |         |        |      |   |         |                     |  |   |         |       |  |  |          |      
|Other hotel operating costs                    |                            |                  |         |        |      |   |         |                     |  |   |         |       |  |  |          |      
|                                               | General and administrative |                  | $       | 22,745 |      |   | $       | 21,011              |  |   | $       | 1,734 |  |  |          | 8.3   | %
|                                               | Advertising and promotion  |                  |         | 16,583 |      |   |         | 14,932              |  |   |         | 1,651 |  |  |          | 11.1  | %
|                                               | Franchise fees             |                  |         | 22,158 |      |   |         | 21,225              |  |   |         | 933   |  |  |          | 4.4   | %
|                                               | Repairs and maintenance    |                  |         | 18,052 |      |   |         | 17,589              |  |   |         | 463   |  |  |          | 2.6   | %
|                                               | Utilities                  |                  |         | 20,422 |      |   |         | 18,282              |  |   |         | 2,140 |  |  |          | 11.7  | %
|                                               | Other expenses             |                  |         | 460    |      |   |         | 77                  |  |   |         | 383   |  |  |          | 496.9 | %
|                                               |                            |                  |         |        |      |   |         |                     |  |   |         |      
|Total other hotel operating expenses           |                            |                  | 100,420 |        |      |   | 93,116  |                     |  |   | 7,304   |       |  |  | 7.8      | %    
|Property and other taxes, insurance and leases |                            |                  | 22,369  |        |      |   | 21,247  |                     |  |   | 1,122   |       |  |  | 5.3      | %    
|Corporate and other                            |                            |                  | 21,063  |        |      |   | 16,824  |                     |  |   | 4,239   |       |  |  | 25.2     | %    
|Casualty (gains) losses, net                   |                            |                  | (30,929 | )      |      |   | 2,313   |                     |  |   | (33,243 | )     |  |  | (1,436.9 | )%   
|Depreciation and amortization                  |                            |                  | 29,647  |        |      |   | 26,666  |                     |  |   | 2,981   |       |  |  | 11.2     | %    
|Impairment of long-lived assets                |                            |                  | 8,347   |        |      |   | 4,877   |                     |  |   | 3,470   |       |  |  | 71.2     | %    
|                                               |                            |                  |         |        |      |   |         |                     |  |   |         |      
|Total other operating expenses                 |                            | $                | 150,917 |        |      | $ | 165,043 |                     |  | $ | (14,127 | )     |  |  | (8.6     | )%   
|                                               |                            |                  |         |        |      |   |         |                     |  |   |         |      
|% of total revenues                            |                            |                  | 47.3    | %      |      |   | 52.8    | %                   |  |   |         |       |  |  |          |      





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General and administrative costs increased $1.7 million or
    8.3%, primarily due to $0.3 million of increased costs
    related to our property management system conversions,
    $0.9 million of increased costs related to group medical
    insurance claims and additional payroll costs, a
    $0.3 million increase in vacation pay accruals and the
    $0.5 million write-off of the Delta Airlines and Northwest
    Airlines receivables as a result of their respective
    Chapter 11 bankruptcy filings;
|
| |  | Advertising and promotion expenses increased $1.7 million
    or 11.1% primarily due to $1.5 million of increased costs
    related to the addition of sales personnel and sales programs to
    promote our newly renovated properties including the Crowne
    Plaza West Palm Beach, FL and the Crowne Plaza Melbourne, FL
    hotels, and $0.1 million in added costs related to
    increased group medical insurance claims;                                                                                      
|
| |  | Franchise fees increased $0.9 million or 4.4% primarily as
    a result of increased revenues. As a percentage of room
    revenues, 2005 franchise fees were unchanged as compared to 2004
    at 9.2%; and                                                                                                                                                                                                                                                                                                            
|
| |  | Utilities costs increased $2.1 million or 11.7% primarily
    as a result of significantly higher utility rates.                                                                                                                                                                                                                                                                                                                                                                                                        





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| |                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) $1.6 million on the Holiday Inn Lawrence, KS hotel
    due to a reduced fair value appraisal;                                                                                                                                                                           
|
| | b) $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;                                              
|
| | c) $0.9 million on the Holiday Inn Hamburg, NY hotel
    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;          
|
| | d) $1.7 million on the Holiday Inn Sheffield, AL as
    this hotel was identified for sale in January 2006 and the
    estimated selling price was less than the assets carrying
    value;                                                                               
|
| | e) $1.8 million on the Fairfield Inn Valdosta, GA as
    this hotel was identified for sale in January 2006 and the
    estimated selling price was less than the assets carrying
    value; and                                                                          
|
| | f) $1.0 million on the Fairfield Inn Merrimack, NH
    hotel 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 value
    to its fair value.

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| |                                                            
| | -----------------------------------------------------------
| | Non-operating income (expenses)  Continuing
    Operations

|                                            |                                    |      |        |                  |      |   |     |                     |   |   |         |        |  |  |          |        |   
|------------------------------------------- | ---------------------------------- | ---- | ------ | ---------------- | ---- | - | --- | ------------------- | - | - | ------- | ------ |  |  | -------- | ------ | --
|                                            |                                    | 2005 |        |                  | 2004 |   |     | Increase (decrease) |  
|                                            |                                    |      |        |                  |      |   |     |                     |  
|                                            |                                    |      |        | ($ in thousands) |      |   |    
|Non-operating income (expenses):            |                                    |      |        |                  |      |   |     |                     |   |   |         |        |  |  |          |       
|Business interruption proceeds              |                                    | $    | 9,595  |                  |      | $ |    |                     |   | $ | 9,595   |        |  |  | n/m      |       
|Interest income and other                   |                                    |      | 855    |                  |      |   | 681 |                     |   |   | 174     |        |  |  | 25.6     | %     
|Interest expense and other financing costs: |                                    |      |        |                  |      |   |     |                     |   |   |         |        |  |  |          |       
|                                            | Preferred stock dividend           |      |        |                 |      |   |     | (9,383              | ) |   |         | 9,383  |  |  |          | (100.0 | )%
|                                            | Other interest expense             |      |        | (27,675          | )    |   |     | (41,725             | ) |   |         | 14,050 |  |  |          | (33.7  | )%
|                                            | Loss on preferred stock redemption |      |        |                 |      |   |     | (6,063              | ) |   |         | 6,063  |  |  |          | (100.0 | )%
|Minority interests                          |                                    |      | (9,588 | )                |      |   | 691 |                     |   |   | (10,279 | )      |  |  | (1,487.6 | )%    











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| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Results of operations for the twelve months ended
    December 31, 2004 and December 31, 2003



| |                                 
| | --------------------------------
| | Revenues  Continuing Operations

|                  |  |                  |         |   |      |          |         |            |  |   |        |   |  |  |      |   
|----------------- |  | ---------------- | ------- | - | ---- | -------- | ------- | ---------- |  | - | ------ | - |  |  | ---- | --
|                  |  |                  |         |   |      | Increase |        
|                  |  | 2004             |         |   | 2003 |          |         | (decrease) | 
|                  |  |                  |         |   |      |          |         |            | 
|                  |  | ($ in thousands) |        
|Revenues:         |  |                  |         |   |      |          |         |            |  |   |        |   |  |  |      |   
|Rooms             |  | $                | 231,255 |   |      | $        | 221,543 |            |  | $ | 9,712  |   |  |  | 4.4  | % 
|Food and beverage |  |                  | 70,631  |   |      |          | 69,016  |            |  |   | 1,615  |   |  |  | 2.3  | % 
|Other             |  |                  | 10,539  |   |      |          | 10,839  |            |  |   | (300   | ) |  |  | (2.8 | )%
|                  |  |                  |         |   |      |          |         |            |  |   |        |  
|Total revenues    |  | $                | 312,425 |   |      | $        | 301,398 |            |  | $ | 11,027 |   |  |  | 3.7  | % 
|                  |  |                  |         |   |      |          |         |            |  |   |        |  
|Occupancy         |  |                  | 61.5    | % |      |          | 60.4    | %          |  |   |        |   |  |  | 1.8  | % 
|ADR               |  | $                | 78.00   |   |      | $        | 75.48   |            |  | $ | 2.52   |   |  |  | 3.3  | % 
|RevPAR            |  | $                | 47.96   |   |      | $        | 45.57   |            |  | $ | 2.39   |   |  |  | 5.2  | % 







| |                                                      
| | -----------------------------------------------------
| | Direct operating expenses  Continuing
    Operations

|                                |  |                  |         |   |      |          |         |            |  |   |       |  |  |  |     |  
|------------------------------- |  | ---------------- | ------- | - | ---- | -------- | ------- | ---------- |  | - | ----- |  |  |  | --- | -
|                                |  |                  |         |   |      | Increase |        
|                                |  | 2004             |         |   | 2003 |          |         | (decrease) | 
|                                |  |                  |         |   |      |          |         |            | 
|                                |  | ($ in thousands) |        
|Direct operating expenses:      |  |                  |         |   |      |          |         |            |  |   |       |  |  |  |     |  
|Rooms                           |  | $                | 65,019  |   |      | $        | 62,968  |            |  | $ | 2,051 |  |  |  | 3.3 | %
|Food and beverage               |  |                  | 49,966  |   |      |          | 47,643  |            |  |   | 2,323 |  |  |  | 4.9 | %
|Other                           |  |                  | 7,907   |   |      |          | 7,799   |            |  |   | 108   |  |  |  | 1.4 | %
|                                |  |                  |         |   |      |          |         |            |  |   |       | 
|Total direct operating expenses |  | $                | 122,892 |   |      | $        | 118,410 |            |  | $ | 4,482 |  |  |  | 3.8 | %
|                                |  |                  |         |   |      |          |         |            |  |   |       | 
|% of total revenues             |  |                  | 39.3    | % |      |          | 39.3    | %          |  |   |       |  |  |  |     |  





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| |                                                 
| | ------------------------------------------------
| | Other operating expenses  Continuing Operations

|                                               |                            |                  |         |        |      |   |         |                     |  |   |        |       |   |  |       |       |   
|---------------------------------------------- | -------------------------- | ---------------- | ------- | ------ | ---- | - | ------- | ------------------- |  | - | ------ | ----- | - |  | ----- | ----- | --
|                                               |                            | 2004             |         |        | 2003 |   |         | Increase (decrease) | 
|                                               |                            |                  |         |        |      |   |         |                     | 
|                                               |                            | ($ in thousands) |        
|Other operating expenses:                      |                            |                  |         |        |      |   |         |                     |  |   |        |       |   |  |       |      
|Other hotel operating costs                    |                            |                  |         |        |      |   |         |                     |  |   |        |       |   |  |       |      
|                                               | General and administrative |                  | $       | 21,011 |      |   | $       | 18,977              |  |   | $      | 2,034 |   |  |       | 10.7  | % 
|                                               | Advertising and promotion  |                  |         | 14,932 |      |   |         | 14,447              |  |   |        | 485   |   |  |       | 3.4   | % 
|                                               | Franchise fees             |                  |         | 21,225 |      |   |         | 19,831              |  |   |        | 1,394 |   |  |       | 7.0   | % 
|                                               | Repairs and maintenance    |                  |         | 17,589 |      |   |         | 16,983              |  |   |        | 606   |   |  |       | 3.6   | % 
|                                               | Utilities                  |                  |         | 18,282 |      |   |         | 18,039              |  |   |        | 243   |   |  |       | 1.3   | % 
|                                               | Other expenses             |                  |         | 77     |      |   |         | 153                 |  |   |        | (76   | ) |  |       | (49.7 | )%
|                                               |                            |                  |         |        |      |   |         |                     |  |   |        |      
|Total other hotel operating expenses           |                            |                  | 93,116  |        |      |   | 88,430  |                     |  |   | 4,686  |       |   |  | 5.3   | %    
|Property and other taxes, insurance and leases |                            |                  | 21,247  |        |      |   | 24,313  |                     |  |   | (3,066 | )     |   |  | (12.6 | )%   
|Corporate and other                            |                            |                  | 16,824  |        |      |   | 20,482  |                     |  |   | (3,658 | )     |   |  | (17.9 | )%   
|Casualty (gains) losses, net                   |                            |                  | 2,313   |        |      |   |        |                     |  |   | 2,313  |       |   |  | n/m   |      
|Depreciation and amortization                  |                            |                  | 26,666  |        |      |   | 28,427  |                     |  |   | (1,761 | )     |   |  | (6.2  | )%   
|Impairment of long-lived assets                |                            |                  | 4,877   |        |      |   | 8,396   |                     |  |   | (3,519 | )     |   |  | (41.9 | )%   
|                                               |                            |                  |         |        |      |   |         |                     |  |   |        |      
|Total other operating expenses                 |                            | $                | 165,043 |        |      | $ | 170,048 |                     |  | $ | (5,005 | )     |   |  | (2.9  | )%   
|                                               |                            |                  |         |        |      |   |         |                     |  |   |        |      
|% of total revenues                            |                            |                  | 52.8    | %      |      |   | 56.5    | %                   |  |   |        |       |   |  |       |      





| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General and administrative costs increased $2.0 million or
    10.7% primarily due $0.9 million in costs related to salary
    and employee benefits, $0.2 million in costs related to
    labor union contract negotiations and $0.6 million in
    higher bad debt costs related to airline contracts;
|
| |  | Advertising and promotion expenses increased $0.5 million
    or 3.4% due to increased costs of advertising marketing research
    materials and salary and benefit increases;                                                                                                                          
|
| |  | Franchise fees increased $1.4 million or 7.0% primarily as
    a result of increased revenues. As a percentage of room
    revenues, franchise fees were 9.2% of revenues in 2004 as
    compared to 9.0% in 2003, largely due to increased costs of
    brand loyalty programs; and                    
|
| |  | Repairs and maintenance costs increased $0.6 million or
    3.6% primarily as a result of our continued focus on our
    preventative maintenance programs.                                                                                                                                             





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| |    |                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $3.7 million on the Park Inn Brunswick, GA hotel, which was
    converted from a Holiday Inn, as this hotel lost the business of
    a significant military group contract and the conversion of this
    hotel to a Park Inn was not expected to improve operating
    results; and    
|
| | b) | $0.6 million on the Holiday Inn Lawrence, KS hotel as the
    financial performance of this hotel continued to decline as it
    is in need of a major renovation which is not economically
    justifiable as management was notified the franchise agreement
    would not be renewed.

53



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| |                                                            
| | -----------------------------------------------------------
| | Non-operating income (expenses)  Continuing
    Operations

|                                            |                          |                  |        |         |      |   |        |                     |   |   |        |         |   |  |        |       |   
|------------------------------------------- | ------------------------ | ---------------- | ------ | ------- | ---- | - | ------ | ------------------- | - | - | ------ | ------- | - |  | ------ | ----- | --
|                                            |                          | 2004             |        |         | 2003 |   |        | Increase (decrease) |  
|                                            |                          |                  |        |         |      |   |        |                     |  
|                                            |                          | ($ in thousands) |       
|Non-operating income (expenses):            |                          |                  |        |         |      |   |        |                     |   |   |        |         |   |  |        |      
|Interest income and other                   |                          | $                | 681    |         |      | $ | 807    |                     |   | $ | (126   | )       |   |  | (15.6  | )%   
|Gain on asset dispositions                  |                          |                  |       |         |      |   | 445    |                     |   |   | (445   | )       |   |  | (100.0 | )%   
|Interest expense and other financing costs: |                          |                  |        |         |      |   |        |                     |   |   |        |         |   |  |        |      
|                                            | Preferred stock dividend |                  |        | (9,383  | )    |   |        | (8,092              | ) |   |        | 1,291   |   |  |        | (16.0 | )%
|                                            | Other interest expense   |                  |        | (41,725 | )    |   |        | (27,626             | ) |   |        | (14,099 | ) |  |        | 51.0  | % 
|Loss on preferred stock redemption          |                          |                  | (6,063 | )       |      |   |       |                     |   |   | (6,063 | )       |   |  | n/m    | %    
|Reorganization items                        |                          |                  |       |         |      |   | (1,355 | )                   |   |   | 1,355  |         |   |  | (100.0 | )%   
|Minority interests                          |                          |                  | 691    |         |      |   | 1,294  |                     |   |   | (603   | )       |   |  | (46.6  | )%   













Results of Operations  Discontinued Operations




54



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| |    |                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | an additional $0.3 million on the Holiday Inn Express
    Gadsden, AL to reflect the estimated selling costs of this sale
    as the hotel was identified for sale in January 2005 and 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;
|
| | b) | an additional $1.7 million on the Holiday Inn Rolling
    Meadows, IL to reflect the lowered selling price of the hotel;                                                                                                                                                                                                                                                            
|
| | c) | an additional $0.3 million on the Holiday Inn Morgantown,
    WV to reflect the reduced selling price and the additional
    charges to dispose of this hotel in February 2005;                                                                                                                                                                                                     
|
| | d) | an additional $0.4 million on the Mt. Laurel, NJ land
    parcel to reflect the lowered estimated selling price of the
    land parcel;                                                                                                                                                                                                                                             
|
| | e) | $1.3 million on the Holiday Inn St. Louis, MO to
    reflect the reduced selling price of the hotel; and                                                                                                                                                                                                                                                                            
|
| | f) | $0.1 million on the Holiday Inn McKnight Pittsburgh, PA as
    the hotel was identified for sale in the fourth quarter 2005 and
    its carrying value was adjusted to the hotels selling
    price less selling costs.                                                                                                                                                            





| |    |                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | an additional $0.1 million on the Holiday Inn Express
    Pensacola, FL to reflect the loss recorded on sale of this hotel
    in March 2004;                                                                                                               
|
| | b) | an additional $0.5 million on the downtown Plaza Hotel
    Cincinnati, OH to reflect the lowered estimated selling price of
    the hotel and the loss recorded on sale of the hotel in April
    2004;                                                     
|
| | c) | an additional $0.4 million on the Holiday Inn Morgantown,
    WV as capital improvements were spent on this hotel for
    franchise compliance that did not add incremental value or
    revenue generating capacity to the property;                       
|
| | d) | an additional $0.7 million on the Holiday Inn Memphis, TN
    to reflect the reduced selling price and additional charges to
    dispose of this hotel in December 2004;                                                                                    
|
| | e) | an additional $1.0 million on the Holiday Inn Austin
    (South), TX to reflect a reduction in the estimated selling
    price due to feedback from potential buyers that this hotel had
    limited future franchise options due to its exterior corridors;

55



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| |    |                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | f) | $1.7 million on the Holiday Inn Rolling Meadows, IL to
    record the difference between the estimated selling price and
    the carrying value of this hotel consistent with an offer
    received on the hotel;                                                                                                                                                                               
|
| | g) | $0.4 million on the Holiday Inn Florence, KY primarily
    related to disposal costs incurred on sale of the hotel in
    December 2004;                                                                                                                                                                                                                                                        
|
| | h) | $1.1 million on the Holiday Inn Express Gadsden, AL as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets carrying value. The
    estimated selling price of this hotel was negatively impacted by
    its franchise agreement expiring in August 2005 and the
    franchisor indicating that it will not renew the agreement;
|
| | i) | $0.9 million on the Holiday Inn St. Louis, MO as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets previously adjusted
    carrying value;                                                                                                                                                                                   
|
| | j) | $0.6 million on the Quality Inn Hotel & Conference
    Center Metairie, LA as capital improvements were spent on health
    and safety items that added no incremental market value or
    revenue generating capacity at this hotel, resulting in the
    recording of impairment to bring the assets carrying value
    in line with the fair value; and                                     
|
| | k) | additional adjustments on four other assets aggregating to a
    reduction of impairment charges of $0.1 million.                                                                                                                                                                                                                                                                               



Income Taxes






EBITDA




56



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|                                                  |  |                  |        |   |      |   |         |      |  |   |         |  
|------------------------------------------------- |  | ---------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                  |  | 2005             |        |   | 2004 |   |         | 2003 | 
|                                                  |  |                  |        |   |      |   |         |      | 
|                                                  |  | ($ in thousands) |       
|Continuing operations:                            |  |                  |        |   |      |   |         |      |  |   |         |  
|Income (loss) from continuing operations          |  | $                | 10,449 |   |      | $ | (31,537 | )    |  | $ | (21,765 | )
|Depreciation and amortization                     |  |                  | 29,647 |   |      |   | 26,666  |      |  |   | 28,427  |  
|Interest income                                   |  |                  | (1,042 | ) |      |   | (650    | )    |  |   | (486    | )
|Interest expense                                  |  |                  | 27,675 |   |      |   | 41,725  |      |  |   | 27,626  |  
|Preferred stock dividends                         |  |                  |       |   |      |   | 9,383   |      |  |   | 8,092   |  
|Loss on preferred stock redemption                |  |                  |       |   |      |   | 6,063   |      |  |   |        |  
|Provision (benefit) for income taxes  continuing |  |                  |        |   |      |   |         |      |  |   |         |  
|operations                                        |  |                  | 6,981  |   |      |   | 228     |      |  |   | 178     |  
|                                                  |  |                  |        |   |      |   |         |      | 
|EBITDA from continuing operations                 |  | $                | 73,710 |   |      | $ | 51,878  |      |  | $ | 42,072  |  
|                                                  |  |                  |        |   |      |   |         |      | 



|                                                                                                                |  |      |         |   |      |   |       |      |  |   |       |  
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                                                |  | 2005 |         |   | 2004 |   |       | 2003 | 
|                                                                                                                |  |      |         |   |      |   |       |      | 
|Post-emergence Chapter 11 expenses, included in corporate
    and other on consolidated statement of operations |  | $    | 173     |   |      | $ | 458   |      |  | $ | 4,788 |  
|Reorganization expenses                                                                                         |  |      |        |   |      |   |      |      |  |   | 1,355 |  
|Gain on asset dispositions                                                                                      |  |      |        |   |      |   |      |      |  |   | (444  | )
|Casualty (gain) loss, net                                                                                       |  |      | (30,929 | ) |      |   | 2,313 |      |  |   |      |  
|Impairment loss                                                                                                 |  |      | 8,347   |   |      |   | 4,877 |      |  |   | 8,396 |  
|Write-off of receivable from non-consolidated hotel                                                             |  |      | 747     |   |      |   |      |      |  |   |      |  
|Guaranty payments on Kansas properties                                                                          |  |      | 500     |   |      |   |      |      |  |   |      |  
|Adjustments to bankruptcy claims reserves                                                                       |  |      |        |   |      |   | (38   | )    |  |   | (215  | )
|Write-off of investment in subsidiary for non-consolidated hotel                                                |  |      | 170     |   |      |   |      |      |  |   |      |  

Quarterly Results of Operations


10-Q


57



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|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |        |        |  
|---------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------- | ------ | ------- | ------- | - | ------ | ------- | ------ | - | ------- | ------ | ------ | ------- | ------ | ------ | ------- | - | ------- | ------- | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------- | - | ------ | ------ | ------ | -
|                                                                 |                                                                | 2005                               |        |         | 2004    |  
|                                                                 |                                                                |                                    |        |         |         |  
|                                                                 |                                                                | Fourth                             |        |         | Third   |   |        | Second  |        |   | First   |        |        | Fourth  |        |        | Third   |   |         | Second  |        |   | First   |       
|                                                                 |                                                                | Quarter                            |        |         | Quarter |   |        | Quarter |        |   | Quarter |        |        | Quarter |        |        | Quarter |   |         | Quarter |        |   | Quarter |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 |                                                                | ($ in thousands)                   |       
|Revenues:                                                        |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | Rooms                                                          |                                    | $      | 56,989  |         |   | $      | 65,743  |        |   | $       | 64,416 |        |         | $      | 54,293 |         |   | $       | 50,254  |        |   | $       | 62,425 |        |   | $       | 62,675 |         |   | $      | 55,901 |       
|                                                                 | Food and beverage                                              |                                    |        | 17,534  |         |   |        | 16,571  |        |   |         | 18,744 |        |         |        | 14,866 |         |   |         | 19,029  |        |   |         | 16,426 |        |   |         | 18,984 |         |   |        | 16,192 |       
|                                                                 | Other                                                          |                                    |        | 2,306   |         |   |        | 2,584   |        |   |         | 2,701  |        |         |        | 2,517  |         |   |         | 2,303   |        |   |         | 2,734  |        |   |         | 2,775  |         |   |        | 2,727  |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 |                                                                |                                    | 76,829 |         |         |   | 84,898 |         |        |   | 85,861  |        |        |         | 71,676 |        |         |   | 71,586  |         |        |   | 81,585  |        |        |   | 84,434  |        |         |   | 74,820 |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Operating expenses:                                              |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | Direct:                                                        |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |        |       
|                                                                 |                                                                | Rooms                              |        |         | 16,555  |   |        |         | 17,829 |   |         |        | 17,541 |         |        |        | 15,419  |   |         |         | 15,557 |   |         |        | 17,782 |   |         |        | 16,288  |   |        |        | 15,392 |  
|                                                                 |                                                                | Food and beverage                  |        |         | 12,605  |   |        |         | 12,047 |   |         |        | 13,062 |         |        |        | 10,996  |   |         |         | 13,874 |   |         |        | 12,302 |   |         |        | 12,473  |   |        |        | 11,317 |  
|                                                                 |                                                                | Other                              |        |         | 1,955   |   |        |         | 2,012  |   |         |        | 2,129  |         |        |        | 1,954   |   |         |         | 1,851  |   |         |        | 2,038  |   |         |        | 2,055   |   |        |        | 1,963  |  
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 |                                                                |                                    | 31,115 |         |         |   | 31,888 |         |        |   | 32,732  |        |        |         | 28,369 |        |         |   | 31,282  |         |        |   | 32,122  |        |        |   | 30,816  |        |         |   | 28,672 |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 |                                                                |                                    | 45,714 |         |         |   | 53,010 |         |        |   | 53,129  |        |        |         | 43,307 |        |         |   | 40,304  |         |        |   | 49,463  |        |        |   | 53,618  |        |         |   | 46,148 |       
|Other operating expenses:                                        |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | Other hotel operating costs                                    |                                    |        | 25,281  |         |   |        | 26,696  |        |   |         | 24,655 |        |         |        | 23,788 |         |   |         | 22,686  |        |   |         | 24,399 |        |   |         | 22,890 |         |   |        | 23,141 |       
|                                                                 | Property and other taxes, insurance and leases                 |                                    |        | 4,971   |         |   |        | 5,908   |        |   |         | 5,814  |        |         |        | 5,676  |         |   |         | 5,042   |        |   |         | 5,431  |        |   |         | 5,165  |         |   |        | 5,609  |       
|                                                                 | Corporate and other                                            |                                    |        | 4,529   |         |   |        | 6,022   |        |   |         | 5,863  |        |         |        | 4,649  |         |   |         | 3,423   |        |   |         | 4,389  |        |   |         | 4,682  |         |   |        | 4,330  |       
|                                                                 | Casualty (gain) losses, net                                    |                                    |        | (31,251 | )       |   |        | 190     |        |   |         | 28     |        |         |        | 104    |         |   |         | 294     |        |   |         | 2,019  |        |   |         |       |         |   |        |       |       
|                                                                 | Depreciation and amortization                                  |                                    |        | 9,167   |         |   |        | 7,099   |        |   |         | 6,793  |        |         |        | 6,588  |         |   |         | 6,451   |        |   |         | 6,884  |        |   |         | 6,725  |         |   |        | 6,606  |       
|                                                                 | Impairment of long-lived assets                                |                                    |        | 5,111   |         |   |        | 613     |        |   |         | 957    |        |         |        | 1,666  |         |   |         | 4,877   |        |   |         |       |        |   |         |       |         |   |        |       |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 | Other operating expenses                                       |                                    |        | 17,808  |         |   |        | 46,528  |        |   |         | 44,110 |        |         |        | 42,471 |         |   |         | 42,773  |        |   |         | 43,122 |        |   |         | 39,462 |         |   |        | 39,686 |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 |                                                                |                                    | 27,906 |         |         |   | 6,482  |         |        |   | 9,019   |        |        |         | 836    |        |         |   | (2,469  | )       |        |   | 6,341   |        |        |   | 14,156  |        |         |   | 6,462  |       
|Other income (expenses):                                         |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | Business interruption insurance proceeds                       |                                    |        | 1,772   |         |   |        | 6,094   |        |   |         | 1,729  |        |         |        |       |         |   |         |        |        |   |         |       |        |   |         |       |         |   |        |       |       
|                                                                 | Interest income and other                                      |                                    |        | 282     |         |   |        | 348     |        |   |         | 54     |        |         |        | 171    |         |   |         | 360     |        |   |         | 212    |        |   |         | 66     |         |   |        | 43     |       
|                                                                 | Interest expense and other financing costs:                    |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |        |       
|                                                                 |                                                                | Preferred stock dividend           |        |         |        |   |        |         |       |   |         |        |       |         |        |        |        |   |         |         |       |   |         |        | (865   | ) |         |        | (4,233  | ) |        |        | (4,285 | )
|                                                                 |                                                                | Other interest expense             |        |         | (7,045  | ) |        |         | (6,833 | ) |         |        | (6,890 | )       |        |        | (6,907  | ) |         |         | (7,351 | ) |         |        | (7,160 | ) |         |        | (19,310 | ) |        |        | (7,904 | )
|                                                                 |                                                                | Loss on preferred stock redemption |        |         |        |   |        |         |       |   |         |        |       |         |        |        |        |   |         |         |       |   |         |        | (4,471 | ) |         |        | (1,592  | ) |        |        |       |  
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Income (loss) before income taxes and minority interest          |                                                                |                                    | 22,915 |         |         |   | 6,091  |         |        |   | 3,912   |        |        |         | (5,900 | )      |         |   | (9,460  | )       |        |   | (5,943  | )      |        |   | (10,913 | )      |         |   | (5,684 | )     
|Minority interests                                               |                                                                |                                    | (8,486 | )       |         |   | (1,127 | )       |        |   | (120    | )      |        |         | 145    |        |         |   | 406     |         |        |   | 503     |        |        |   | (71     | )      |         |   | (147   | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Income (loss) before income taxes  continuing
    operations    |                                                                |                                    | 14,429 |         |         |   | 4,964  |         |        |   | 3,792   |        |        |         | (5,755 | )      |         |   | (9,054  | )       |        |   | (5,440  | )      |        |   | (10,984 | )      |         |   | (5,831 | )     
|(Provision) benefit for income taxes  continuing
    operations |                                                                |                                    | (6,832 | )       |         |   | (13    | )       |        |   | (68     | )      |        |         | (68    | )      |         |   | 261     |         |        |   | (337    | )      |        |   | (76     | )      |         |   | (76    | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Income (loss) from continuing operations                         |                                                                |                                    | 7,597  |         |         |   | 4,951  |         |        |   | 3,724   |        |        |         | (5,823 | )      |         |   | (8,793  | )       |        |   | (5,777  | )      |        |   | (11,060 | )      |         |   | (5,907 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Discontinued operations:                                         |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | (Loss) income from discontinued operations before income taxes |                                    |        | 1,442   |         |   |        | 4,758   |        |   |         | (1,850 | )      |         |        | (1,263 | )       |   |         | (4,971  | )      |   |         | 2,040  |        |   |         | 3,813  |         |   |        | (1,179 | )     
|                                                                 | Income tax benefit (provision)                                 |                                    |        | (1,235  | )       |   |        |        |        |   |         |       |        |         |        |       |         |   |         |        |        |   |         |       |        |   |         |       |         |   |        |       |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 | (Loss) income from discontinued operations                     |                                    |        | 207     |         |   |        | 4,758   |        |   |         | (1,850 | )      |         |        | (1,263 | )       |   |         | (4,971  | )      |   |         | 2,040  |        |   |         | 3,813  |         |   |        | (1,179 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Net income (loss)                                                |                                                                |                                    | 7,804  |         |         |   | 9,709  |         |        |   | 1,874   |        |        |         | (7,086 | )      |         |   | (13,764 | )       |        |   | (3,737  | )      |        |   | (7,247  | )      |         |   | (7,086 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Net income (loss) attributable to common stock                   |                                                                | $                                  | 7,804  |         |         | $ | 9,709  |         |        | $ | 1,874   |        |        | $       | (7,086 | )      |         | $ | (13,764 | )       |        | $ | (3,737  | )      |        | $ | (7,247  | )      |         | $ | (7,086 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       

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|                                                                 |  |                  |        |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |        |  
|---------------------------------------------------------------- |  | ---------------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | ------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------- | - |  | - | ------ | -
|                                                                 |  | 2005             |        |   | 2004    |  
|                                                                 |  |                  |        |   |         |  
|                                                                 |  | Fourth           |        |   | Third   |   |        | Second  |  |   | First   |   |  | Fourth  |        |   | Third   |   |        | Second  |  |   | First   |  
|                                                                 |  | Quarter          |        |   | Quarter |   |        | Quarter |  |   | Quarter |   |  | Quarter |        |   | Quarter |   |        | Quarter |  |   | Quarter |  
|                                                                 |  |                  |        |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |        |         |  |   |         |  
|                                                                 |  | ($ in thousands) |       
|Continuing operations:                                           |  |                  |        |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations                         |  | $                | 7,597  |   |         | $ | 4,951  |         |  | $ | 3,724   |   |  | $       | (5,823 | ) |         | $ | (8,793 | )       |  | $ | (5,777  | ) |  | $ | (11,060 | ) |  | $ | (5,907 | )
|Depreciation and amortization                                    |  |                  | 9,167  |   |         |   | 7,099  |         |  |   | 6,793   |   |  |         | 6,588  |   |         |   | 6,451  |         |  |   | 6,884   |   |  |   | 6,725   |   |  |   | 6,606  |  
|Interest income                                                  |  |                  | (270   | ) |         |   | (347   | )       |  |   | (205    | ) |  |         | (220   | ) |         |   | (346   | )       |  |   | (176    | ) |  |   | (80     | ) |  |   | (48    | )
|Interest expense                                                 |  |                  | 7,045  |   |         |   | 6,833  |         |  |   | 6,890   |   |  |         | 6,907  |   |         |   | 7,351  |         |  |   | 7,160   |   |  |   | 19,310  |   |  |   | 7,904  |  
|Preferred stock dividends                                        |  |                  |       |   |         |   |       |         |  |   |        |   |  |         |       |   |         |   |       |         |  |   | 865     |   |  |   | 4,233   |   |  |   | 4,285  |  
|Loss on preferred stock redemption                               |  |                  |       |   |         |   |       |         |  |   |        |   |  |         |       |   |         |   |       |         |  |   | 4,471   |   |  |   | 1,592   |   |  |   |       |  
|Provision (benefit) for income taxes  continuing
    operations |  |                  | 6,832  |   |         |   | 13     |         |  |   | 68      |   |  |         | 68     |   |         |   | (261   | )       |  |   | 337     |   |  |   | 76      |   |  |   | 76     |  
|                                                                 |  |                  |        |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |        |         |  |   |         |  
|EBITDA from continuing operations                                |  | $                | 30,371 |   |         | $ | 18,549 |         |  | $ | 17,270  |   |  | $       | 7,520  |   |         | $ | 4,402  |         |  | $ | 13,764  |   |  | $ | 20,796  |   |  | $ | 12,916 |  
|                                                                 |  |                  |        |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |        |         |  |   |         |  



|                                                                                                                |  |                  |         |   |         |   |      |         |  |   |         |  |  |         |       |  |         |   |       |         |  |   |         |  |  |   |     |  |  |   |     | 
|--------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------- | - | ---- | ------- |  | - | ------- |  |  | ------- | ----- |  | ------- | - | ----- | ------- |  | - | ------- |  |  | - | --- |  |  | - | --- | 
|                                                                                                                |  | 2005             |         |   | 2004    |  
|                                                                                                                |  |                  |         |   |         |  
|                                                                                                                |  | Fourth           |         |   | Third   |   |      | Second  |  |   | First   |  |  | Fourth  |       |  | Third   |   |       | Second  |  |   | First   | 
|                                                                                                                |  | Quarter          |         |   | Quarter |   |      | Quarter |  |   | Quarter |  |  | Quarter |       |  | Quarter |   |       | Quarter |  |   | Quarter | 
|                                                                                                                |  |                  |         |   |         |   |      |         |  |   |         |  |  |         |       |  |         |   |       |         |  |   |         | 
|                                                                                                                |  | ($ in thousands) |        
|Post-emergence Chapter 11 expenses, included in corporate
    and other on consolidated statement of operations |  | $                | (2      | ) |         | $ | 13   |         |  | $ | 52      |  |  | $       | 110   |  |         | $ | 61    |         |  | $ | 67      |  |  | $ | 135 |  |  | $ | 195 | 
|Casualty (gain) loss, net                                                                                       |  |                  | (31,251 | ) |         |   | 190  |         |  |   | 28      |  |  |         | 104   |  |         |   | 294   |         |  |   | 2,019   |  |  |   |    |  |  |   |    | 
|Impairment loss                                                                                                 |  |                  | 5,111   |   |         |   | 613  |         |  |   | 957     |  |  |         | 1,666 |  |         |   | 4,877 |         |  |   |        |  |  |   |    |  |  |   |    | 
|Write-off (recovery) of receivable from non- consolidated
    hotel                                             |  |                  | 1       |   |         |   | (200 | )       |  |   | 946     |  |  |         |      |  |         |   |      |         |  |   |        |  |  |   |    |  |  |   |    | 
|Guaranty payments on Kansas properties                                                                          |  |                  |        |   |         |   |     |         |  |   | 500     |  |  |         |      |  |         |   |      |         |  |   |        |  |  |   |    |  |  |   |    | 
|Adjustments to bankruptcy claims reserves                                                                       |  |                  |        |   |         |   |     |         |  |   |        |  |  |         |      |  |         |   | (38   | )       |  |   |        |  |  |   |    |  |  |   |    | 
|Write-off of investment in subsidiary for non- consolidated hotel                                               |  |                  |        |   |         |   |     |         |  |   | 170     |  |  |         |      |  |         |   |      |         |  |   |        |  |  |   |    |  |  |   |    | 



Liquidity and Capital Resources




| |                
| | ---------------
| | Working Capital





59



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60



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| |          
| | ---------
| | Cash Flow







| |                     
| | --------------------
| | Operating activities



61



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| |                     
| | --------------------
| | Investing activities





| |                     
| | --------------------
| | Financing activities







| |                                 
| | --------------------------------
| | Debt and contractual obligations



|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            |  |   |       |        |  |   |       |       | 
|----------------------------------------------- | ----------------------- | ---------------- | ------- | ----------------------------------- | ---- | - | ------ | ------ |  | - | ------ | ------ |  | ---- | ------ | ------ | ---- | - | ------- | ---------- |  | - | ----- | ------ |  | - | ----- | ----- | 
|                                                |                         |                  |         | Contractual Obligations Due by Year |     
|                                                |                         |                  |         |                                     |     
|                                                |                         | Total            |         |                                     | 2006 |   |        | 2007   |  |   | 2008   |        |  | 2009 |        |        | 2010 |   |         | After 2010 | 
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            | 
|                                                |                         | ($ in thousands) |        
|Continuing Operations                           |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            |  |   |       |        |  |   |       |      
|Refinancing debt(1)                             |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            |  |   |       |        |  |   |       |      
|Merrill Lynch Mortgage Lending, Inc.  Floating |                         | $                | 66,311  |                                     |      | $ | 741    |        |  | $ | 65,570 |        |  | $    |       |        |      | $ |        |            |  | $ |      |        |  | $ |      |      
|Merrill Lynch Mortgage Lending, Inc.  Fixed    |                         |                  | 252,377 |                                     |      |   | 4,318  |        |  |   | 4,615  |        |  |      | 4,886  |        |      |   | 238,558 |            |  |   |      |        |  |   |      |      
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            | 
|Merrill Lynch Mortgage Lending, Inc.  Total    |                         |                  | 318,688 |                                     |      |   | 5,059  |        |  |   | 70,185 |        |  |      | 4,886  |        |      |   | 238,558 |            |  |   |      |        |  |   |      |      
|Other financings                                |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            |  |   |       |        |  |   |       |      
|Computer Share Trust Company of Canada          |                         |                  | 7,838   |                                     |      |   | 288    |        |  |   | 7,550  |        |  |      |       |        |      |   |        |            |  |   |      |        |  |   |      |      
|Column Financial, Inc.                          |                         |                  | 10,337  |                                     |      |   | 706    |        |  |   | 784    |        |  |      | 871    |        |      |   | 968     |            |  |   | 7,008 |        |  |   |      |      
|Lehman Brothers Holdings, Inc.                  |                         |                  | 22,398  |                                     |      |   | 580    |        |  |   | 21,818 |        |  |      |       |        |      |   |        |            |  |   |      |        |  |   |      |      
|JP Morgan Chase Bank, Trustee                   |                         |                  | 10,064  |                                     |      |   | 10,064 |        |  |   |       |        |  |      |       |        |      |   |        |            |  |   |      |        |  |   |      |      
|Wachovia                                        |                         |                  | 13,173  |                                     |      |   | 212    |        |  |   | 239    |        |  |      | 251    |        |      |   | 269     |            |  |   | 3,134 |        |  |   | 9,068 |      
|IXIS Real Estate Capital, Inc.                  |                         |                  | 19,000  |                                     |      |   |       |        |  |   | 214    |        |  |      | 18,786 |        |      |   |        |            |  |   |      |        |  |   |      |      
|Column Financial, Inc.                          |                         |                  | 8,146   |                                     |      |   | 477    |        |  |   | 524    |        |  |      | 575    |        |      |   | 632     |            |  |   | 5,938 |        |  |   |      |      
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            | 
|                                                | Total  other financing |                  |         | 90,956                              |      |   |        | 12,327 |  |   |        | 31,129 |  |      |        | 20,483 |      |   |         | 1,869      |  |   |       | 16,080 |  |   |       | 9,068 | 
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |        |  |      |        |        |      |   |         |            | 

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|                                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            |  |   |        |   |  |   |         |   | 
|-------------------------------------------------- | ---------------------------------------------------- | ---------------- | ------- | ----------------------------------- | ---- | - | ------ | ---- |  | - | ------- | ----- |  | ---- | ------ | -- | ---- | - | ------- | ---------- |  | - | ------ | - |  | - | ------- | - | 
|                                                   |                                                      |                  |         | Contractual Obligations Due by Year |     
|                                                   |                                                      |                  |         |                                     |     
|                                                   |                                                      | Total            |         |                                     | 2006 |   |        | 2007 |  |   | 2008    |       |  | 2009 |        |    | 2010 |   |         | After 2010 | 
|                                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            | 
|                                                   |                                                      | ($ in thousands) |        
|Total Mortgage Debt                                |                                                      |                  | 409,644 |                                     |      |   | 17,386 |      |  |   | 101,314 |       |  |      | 25,369 |    |      |   | 240,427 |            |  |   | 16,080 |   |  |   | 6,068   |  
|Long-term debt  other(2)                          |                                                      |                  | 3,319   |                                     |      |   | 1,144  |      |  |   | 1,154   |       |  |      | 752    |    |      |   | 187     |            |  |   | 73     |   |  |   | 9       |  
|                                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            | 
|Total long-term debt                               |                                                      |                  | 412,963 |                                     |      |   | 18,530 |      |  |   | 102,468 |       |  |      | 26,121 |    |      |   | 240,614 |            |  |   | 16,153 |   |  |   | 9,077   |  
|Interest Expense(3)                                |                                                      |                  | 82,887  |                                     |      |   | 28,542 |      |  |   | 22,071  |       |  |      | 19,893 |    |      |   | 11,386  |            |  |   | 995    |   |  |   |        |  
|Ground and parking lease obligations               |                                                      |                  | 116,585 |                                     |      |   | 3,214  |      |  |   | 3,235   |       |  |      | 3,307  |    |      |   | 3,342   |            |  |   | 3,429  |   |  |   | 100,058 |  
|Executive Employment Contracts                     |                                                      |                  | 3,708   |                                     |      |   | 1,692  |      |  |   | 1,175   |       |  |      | 841    |    |      |   |        |            |  |   |       |   |  |   |        |  
|Purchase obligations                               |                                                      |                  | 3,267   |                                     |      |   | 892    |      |  |   | 771     |       |  |      | 497    |    |      |   | 480     |            |  |   | 498    |   |  |   | 129     |  
|                                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            | 
|Total obligations related to continuing operations |                                                      | $                | 619,410 |                                     |      | $ | 52,870 |      |  | $ | 129,720 |       |  | $    | 50,659 |    |      | $ | 255,822 |            |  | $ | 21,075 |   |  | $ | 109,264 |  
|                                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            | 
|Discontinued operations                            |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            |  |   |        |   |  |   |         |  
|Refinancing debt                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            |  |   |        |   |  |   |         |  
|Merrill Lynch Mortgage Lending, Inc.  Floating    |                                                      | $                | 1,235   |                                     |      | $ | 14     |      |  | $ | 1,221   |       |  | $    |       |    |      | $ |        |            |  | $ |       |   |  | $ |        |  
|Long-term debt  other(2)                          |                                                      |                  | 52      |                                     |      |   | 9      |      |  |   | 10      |       |  |      | 10     |    |      |   | 10      |            |  |   | 9      |   |  |   | 4       |  
|Interest Expense(3)                                |                                                      |                  | 105     |                                     |      |   | 97     |      |  |   | 8       |       |  |      |       |    |      |   |        |            |  |   |       |   |  |   |        |  
|Ground and parking lease obligations               |                                                      |                  |        |                                     |      |   |       |      |  |   |        |       |  |      |       |    |      |   |        |            |  |   |       |   |  |   |        |  
|Purchase Obligations                               |                                                      |                  | 23      |                                     |      |   | 18     |      |  |   | 5       |       |  |      |       |    |      |   |        |            |  |   |       |   |  |   |        |  
|                                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            | 
|                                                   | Total obligations related to discontinued operations |                  | $       | 1,415                               |      |   | $      | 138  |  |   | $       | 1,244 |  |      | $      | 10 |      |   | $       | 10         |  |   | $      | 9 |  |   | $       | 4 | 
|                                                   |                                                      |                  |         |                                     |      |   |        |      |  |   |         |       |  |      |        |    |      |   |         |            | 





| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Franchise fees  Substantially all of our franchise
    fees vary with revenues. Franchise fees expense for 2005
    relating to continuing operations are shown under the caption
    Franchise Agreements and Capital Expenditures.



| |              
| | -------------
| | Mortgage Debt





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| |   |                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Extension of the initial maturity from June 30, 2006 to
    January 11, 2007. We still maintain the option, subject to
    certain conditions, to extend the loan for up to three years
    from the new initial maturity date in January 2007;                                                                                                                      
|
| |  | Three additional properties in the floating rate pool are now
    classified as sale properties. Once classified as
    sale properties a hotel will be able to be released
    from the collateral pool by payment of the greater of
    (a) 100% of the aggregate allocated loan amount (lowered
    from 125%) and (b) the net sales proceeds of the property;
|
| |  | The prepayment penalty dropped to 1% in July 2005 and has been
    further reduced for the three additional sale properties after
    July 2005 to 0.5%; and                                                                                                                                                                                                         
|
| |  | Certain required capital and environmental repairs under the
    original Floating Rate Loan have been determined not to be
    necessary and have been removed as requirements under the loan.                                                                                                                                                                      

1 2


12-month 12-month


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1 2






| |                      
| | ---------------------
| | Column Financial Debt





| |                 
| | ----------------
| | Other Financings





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30-day










| |                     
| | --------------------
| | Mortgaged Properties



|                                                |  |           |    |                   |                    |   |         |                 |  |   |                |  |  |                 
|----------------------------------------------- |  | --------- | -- | ----------------- | ------------------ | - | ------- | --------------- |  | - | -------------- |  |  | ----------------
|                                                |  |           |    | December 31, 2005 |                    |   |        
|                                                |  |           |    |                   |                    |   |        
|                                                |  | Number    |    |                   | Property and       |   |         | Long-term       |  |   |               
|                                                |  | of Hotels |    |                   | Equipment, net (1) |   |         | Obligations (1) |  |   | Interest Rates
|                                                |  |           |    |                   |                    |   |         |                 |  |   |               
|                                                |  |           |    | ($ in thousands)  |                    |   |        
|Refinancing Debt                                |  |           |    |                   |                    |   |         |                 |  |   |                |  |  |                 
|Merrill Lynch Mortgage Lending, Inc.  Floating |  |           | 19 |                   |                    | $ | 93,977  |                 |  | $ | 67,546         |  |  | LIBOR plus 3.40%
|Merrill Lynch Mortgage Lending, Inc.  Fixed    |  |           | 34 |                   |                    |   | 333,825 |                 |  |   | 252,377        |  |  | 6.58%           
|                                                |  |           |    |                   |                    |   |         |                 |  |   |               
|Merrill Lynch Mortgage Lending, Inc.  Total    |  |           | 53 |                   |                    |   | 427,802 |                 |  |   | 319,923        |  |  |                 

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|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |                |         |  |                                   | 
|----------------------------------------------------------------- | -------------------------- | --------- | -- | ----------------- | ------------------ |  | ------- | --------------- |  |  | -------------- | ------- |  | --------------------------------- | 
|                                                                  |                            |           |    | December 31, 2005 |                    |  |        
|                                                                  |                            |           |    |                   |                    |  |        
|                                                                  |                            | Number    |    |                   | Property and       |  |         | Long-term       |  |  |               
|                                                                  |                            | of Hotels |    |                   | Equipment, net (1) |  |         | Obligations (1) |  |  | Interest Rates
|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |               
|                                                                  |                            |           |    | ($ in thousands)  |                    |  |        
|Other Financings                                                  |                            |           |    |                   |                    |  |         |                 |  |  |                |         |  |                                  
|Computer Share Trust Company of Canada                            |                            |           | 1  |                   |                    |  | 16,260  |                 |  |  | 7,838          |         |  | 7.88%                            
|Column Financial, Inc.                                            |                            |           | 7  |                   |                    |  | 51,603  |                 |  |  | 10,337         |         |  | 10.59%                           
|Lehman Brothers Holdings, Inc.                                    |                            |           | 5  |                   |                    |  | 58,161  |                 |  |  | 22,398         |         |  | $15,777 at 9.40%; $6,621 at 8.90%
|JP Morgan Chase Bank                                              |                            |           | 2  |                   |                    |  | 6,019   |                 |  |  | 10,064         |         |  | 8.00%                            
|Wachovia                                                          |                            |           | 2  |                   |                    |  | 13,525  |                 |  |  | 13,173         |         |  | $10,000 at 6.03%; $3,173 at 5.78%
|IXIS Real Estate Capital, Inc.                                    |                            |           | 1  |                   |                    |  | 15,378  |                 |  |  | 19,000         |         |  | LIBOR plus 2.90%                 
|Column Financial, Inc.                                            |                            |           | 1  |                   |                    |  | 11,357  |                 |  |  | 8,146          |         |  | 9.45%                            
|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |               
|                                                                  | Total  other financing    |           |    | 19                |                    |  |         | 172,303         |  |  |                | 90,956  |  |                                   | 
|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |               
|                                                                  |                            |           | 72 |                   |                    |  | 600,105 |                 |  |  | 410,879        |         |  | 7.15%(3)                         
|Long-term liabilities  other                                     |                            |           |    |                   |                    |  |         |                 |  |  |                |         |  |                                  
|Tax notes issued pursuant to our Joint Plan of
    Reorganization |                            |           |   |                   |                    |  |        |                 |  |  | 2,220          |         |  |                                  
|Other                                                             |                            |           |   |                   |                    |  |        |                 |  |  | 1,151          |         |  |                                  
|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |               
|                                                                  |                            |           |   |                   |                    |  |        |                 |  |  | 3,371          |         |  |                                  
|Property and equipment  other                                    |                            |           | 5  |                   |                    |  | 20,554  |                 |  |  |               |         |  |                                  
|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |               
|                                                                  |                            |           | 77 |                   |                    |  | 620,659 |                 |  |  | 414,250        |         |  |                                  
|Held for sale                                                     |                            |           | (3 | )                 |                    |  | (13,797 | )               |  |  | (1,287         | )       |  |                                  
|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |               
|                                                                  | Total December 31, 2005(2) |           |    | 74                |                    |  | $       | 606,862         |  |  | $              | 412,963 |  |                                   | 
|                                                                  |                            |           |    |                   |                    |  |         |                 |  |  |               






|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Debt obligations and property and equipment of one hotel in
    which we have a non-controlling equity interest that we do not
    consolidate are excluded from the table.
|   
|(2) | Debt obligations at December 31, 2005 include the current
    portion.                                                                                                     
|   
|(3) | The 7.15% in the table represents our weighted average interest
    rate on mortgage debt at December 31, 2005, using the
    December 30, 2005 LIBOR of 4.39%.            





| |                
| | ---------------
| | Preferred Stock





| |                                              
| | ---------------------------------------------
| | Franchise Agreements and Capital Expenditures





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|                        |  |                  |        |  |      |   |        |      |  |   |        | 
|----------------------- |  | ---------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                        |  | 2005             |        |  | 2004 |   |        | 2003 | 
|                        |  |                  |        |  |      |   |        |      | 
|                        |  | ($ in thousands) |       
|Continuing operations   |  | $                | 22,158 |  |      | $ | 21,225 |      |  | $ | 19,831 | 
|Discontinued operations |  |                  | 1,486  |  |      |   | 3,136  |      |  |   | 4,554  | 
|                        |  |                  |        |  |      |   |        |      | 
|                        |  | $                | 23,644 |  |      | $ | 24,361 |      |  | $ | 24,385 | 
|                        |  |                  |        |  |      |   |        |      | 











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Six hotels are held for sale. Two of these hotels are in default
    of their respective franchise agreement for failure to complete
    their Property Improvement Plan (PIP). Four
    additional hotels are in default or in non-compliance of their
    respective franchise agreements for not maintaining required
    guest satisfaction scores. Each of these hotels requires a
    significant capital investment for which we do not anticipate a
    sufficient return on our investment. We have entered into a
    forbearance agreement with the franchisor regarding one of these
    hotels that is in default which will maintain the flag until the
    earlier of March 31, 2006 or until we sell the hotel. We
    plan to enter into a voluntary termination agreement with the
    franchisor regarding two of these hotels which will maintain the
    flag until the earlier of June 30, 2006 or until we sell
    the hotels.
|
| |  | One hotel was held for sale but was reclassified into continuing
    operations in the fourth quarter 2005 as management no longer
    expected to have the hotel sold within one year due to issues
    related to the transfer of the ground lease to a prospective
    buyer. This hotel is in default of its franchise agreement for
    not maintaining required guest satisfaction scores and has a
    license termination date of February 14, 2006. We may be
    subject to liquidated damages. We have entered into a letter of
    intent to sell this                                                                                                                                                                                                                                                                                                                                                                                      

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | hotel to a joint venture in which we will be a minority owner.
    However, we will no longer continue to operate the hotel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | One hotel has received an extension to its default termination
    date until August 15, 2006. The franchisor has verbally
    agreed to our planned renovations of two floors of guestrooms
    and guestroom corridors. This work began on January 9, 2006
    and will take approximately 90 days to complete. We
    anticipate the renovations will assist us in improving the quest
    product scores.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Seven hotels are in default or non-compliance of their
    respective franchise agreement because of substandard guest
    satisfaction or quality scores. Three of these hotels are
    trending above the required thresholds, however, they must
    remain above that threshold for two consecutive years to earn a
    clean slate letter. We anticipate these three hotels
    will earn their clean slate letters in August 2006,
    August 2007 and February 2008, respectively. Two of these hotels
    are awaiting follow-up
    quality inspections by the franchisor to cure the non-compliance
    issues. Two of these hotels have entered into the non-compliance
    status due to a new measurement process implemented in January
    2006 by the franchisor. One of these hotels in non-compliance
    recently received an up-branding renovation. The scores used to
    determine this non-compliance were done before the
    pre-renovation and we anticipate curing this non-compliance as
    the new scores begin to cycle in. Our corporate operations team,
    as well as each propertys general manager and associates,
    have focused their efforts to cure these failures through
    enhanced service, increased cleanliness, and product
    improvements by the required cure date. If we do not achieve
    scores above required thresholds by the designated date, the
    hotel would be subject to default of its franchise agreement.
    Each hotel would receive another opportunity to improve its
    score before the hotel would be at the risk of having its
    franchise agreement terminated.











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Off Balance Sheet Arrangements




New Accounting Pronouncements

















|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk





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25-month















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

F-1.







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

10-K.







|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure, Controls and Procedures.


71



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Changes in Internal Control Over Financial Reporting.


Managements Report on Internal Control over Financial
Reporting. 13a-15(f) Internal Control  Integrated
Framework,




90-7, paid-in


Internal
Control  Integrated Framework




72



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Managements Corrective Actions






73



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Internal Control  Integrated Framework












74



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##### Table of Contents







Internal Control  Integrated Framework Internal Control  Integrated Framework




Deloitte & Touche
LLP






75



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SIGNATURES






| |              
| | -------------
| | LODGIAN, INC.



| |     |                      
| | --- | ---------------------
| | By: | /s/ Edward J. Rohling

| |                                      
| | -------------------------------------
| |                                      
| | Edward J. Rohling                    
| | President and Chief Executive Officer



|                                                 |  |                                                      |  | 
|------------------------------------------------ |  | ---------------------------------------------------- |  | 
|Signature                                        |  | Title                                               
|                                                 |  |                                                     
|                                                
|/s/ Edward J. RohlingEdward J. Rohling           |  | President, Chief Executive Officer and Director     
|                                                
|/s/ Linda Borchert
    PhilpLinda Borchert Philp |  | Executive Vice President and Chief Financial Officer
|                                                
|/s/ Russel S. BernardRussel S. Bernard           |  | Chairman of the Board of Directors                  
|                                                
|/s/ Sean F. ArmstrongSean F. Armstrong           |  | Director                                            
|                                                
|/s/ Stewart BrownStewart Brown                   |  | Director                                            
|                                                
|/s/ Stephen P.
    GrathwohlStephen P. Grathwohl |  | Director                                            
|                                                
|/s/ Kenneth A. CaplanKenneth A. Caplan           |  | Director                                            
|                                                
|/s/ Kevin C. McTavishKevin C. McTavish           |  | Director                                            
|                                                
|/s/ Dr. Sheryl E. KimesDr. Sheryl E. Kimes       |  | Director                                            
|                                                
|/s/ Alex R. LieblongAlex R. Lieblong             |  | Director                                            

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PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting 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:



| |                                  
| | ---------------------------------
| | (2) Financial Statement Schedule:



| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All Schedules are omitted because they are not applicable or
    required information is shown in the Consolidated Financial
    Statements or notes thereto.



| |              
| | -------------
| | (3) Exhibits:



| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | The information called for by this paragraph is contained in the
    Exhibits Index of this report, which is incorporated herein
    by reference.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




|                                                                                                                                       |  |      |     | 
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                       |  | Page |    
|                                                                                                                                       |  |      |    
|Report of Independent Registered Public
    Accounting Firm                                                                            |  |      | F-2 | 
|Consolidated Balance Sheets as of
    December 31, 2005 and December 31, 2004                                                          |  |      | F-3 | 
|Consolidated Statements of Operations for
    the years ended December 31, 2005, December 31, 2004
    and December 31, 2003           |  |      | F-4 | 
|Consolidated Statements of
    Stockholders Equity for the years ended December 31,
    2005, December 31, 2004 and December 31, 2003 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2005, December 31, 2004
    and December 31, 2003           |  |      | F-6 | 
|Notes to the Consolidated Financial
    Statements                                                                                     |  |      | F-7 | 



F-1



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















Deloitte & Touche
LLP






F-2



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LODGIAN, INC. AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


|                                     |                                                                                                                                                               |                                     |                           |         |                   |        |         |         |         |         | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------- | ------- | ----------------- | ------ | ------- | ------- | ------- | ------- | 
|                                     |                                                                                                                                                               | December 31, 2005                   |                           |         | December 31, 2004 |       
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|                                     |                                                                                                                                                               | ($ in thousands, except share data) |                          
|ASSETS                              
|Current assets:                      |                                                                                                                                                               |                                     |                           |         |                   |        |         |        
|                                     | Cash and cash equivalents                                                                                                                                     |                                     | $                         | 19,097  |                   |        | $       | 36,234  |        
|                                     | Cash, restricted                                                                                                                                              |                                     |                           | 15,003  |                   |        |         | 9,840   |        
|                                     | Accounts receivable (net of allowances: 2005 
    $1,101;
    2004  $684)                                                                                   |                                     |                           | 8,054   |                   |        |         | 7,967   |        
|                                     | Insurance receivable                                                                                                                                          |                                     |                           | 11,725  |                   |        |         | 3,280   |        
|                                     | Inventories                                                                                                                                                   |                                     |                           | 3,955   |                   |        |         | 3,757   |        
|                                     | Prepaid expenses and other current assets                                                                                                                     |                                     |                           | 20,101  |                   |        |         | 17,542  |        
|                                     | Assets held for sale                                                                                                                                          |                                     |                           | 14,866  |                   |        |         | 30,559  |        
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|                                     |                                                                                                                                                               |                                     | Total current assets      |         |                   | 92,801 |         |         |         | 109,179 | 
|Property and equipment, net          |                                                                                                                                                               |                                     | 606,862                   |         |                   |        | 571,126 |        
|Deposits for capital expenditures    |                                                                                                                                                               |                                     | 19,431                    |         |                   |        | 34,787  |        
|Other assets                         |                                                                                                                                                               |                                     | 7,591                     |         |                   |        | 8,556   |        
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|                                     |                                                                                                                                                               | $                                   | 726,685                   |         |                   | $      | 723,648 |        
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                                                               |                                     |                           |         |                   |        |         |        
|                                     | Accounts payable                                                                                                                                              |                                     | $                         | 14,709  |                   |        | $       | 10,957  |        
|                                     | Other accrued liabilities                                                                                                                                     |                                     |                           | 31,528  |                   |        |         | 31,785  |        
|                                     | Advance deposits                                                                                                                                              |                                     |                           | 1,914   |                   |        |         | 1,638   |        
|                                     | Insurance advances                                                                                                                                            |                                     |                           | 700     |                   |        |         | 2,000   |        
|                                     | Current portion of long-term liabilities                                                                                                                      |                                     |                           | 18,531  |                   |        |         | 25,290  |        
|                                     | Liabilities related to assets held for sale                                                                                                                   |                                     |                           | 4,610   |                   |        |         | 30,572  |        
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|                                     |                                                                                                                                                               |                                     | Total current liabilities |         |                   | 71,992 |         |         |         | 102,242 | 
|Long-term liabilities                |                                                                                                                                                               |                                     | 394,432                   |         |                   |        | 393,143 |        
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|Total liabilities                    |                                                                                                                                                               |                                     | 466,424                   |         |                   |        | 495,385 |        
|Minority interests                   |                                                                                                                                                               |                                     | 11,217                    |         |                   |        | 1,629   |        
|Commitments and contingencies        |                                                                                                                                                               |                                     |                           |         |                   |        |         |        
|Stockholders equity:                |                                                                                                                                                               |                                     |                           |         |                   |        |         |        
|                                     | Common stock, $.01 par value, 60,000,000 shares
    authorized; 24,648,405 and 24,579,255 issued at
    December 31, 2005 and December 31, 2004, respectively |                                     |                           | 246     |                   |        |         | 246     |        
|                                     | Additional paid-in capital                                                                                                                                    |                                     |                           | 317,034 |                   |        |         | 306,943 |        
|                                     | Unearned stock compensation                                                                                                                                   |                                     |                           | (604    | )                 |        |         | (315    | )      
|                                     | Accumulated deficit                                                                                                                                           |                                     |                           | (69,640 | )                 |        |         | (81,941 | )      
|                                     | Accumulated other comprehensive income                                                                                                                        |                                     |                           | 2,234   |                   |        |         | 1,777   |        
|                                     | Treasury stock, at cost, 21,633 and 7,211 shares at
    December 31, 2005 and December 31, 2004, respectively                                                 |                                     |                           | (226    | )                 |        |         | (76     | )      
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|                                     |                                                                                                                                                               | Total stockholders equity          |                           |         | 249,044           |        |         |         | 226,634 |        
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       
|                                     |                                                                                                                                                               | $                                   | 726,685                   |         |                   | $      | 723,648 |        
|                                     |                                                                                                                                                               |                                     |                           |         |                   |       



F-3



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                   |                                                                |                                         |         |         |         |      |         |         |         |       |         |         |         |        |  
|---------------------------------------------------------------------------------- | -------------------------------------------------------------- | --------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | ----- | ------- | ------- | ------- | ------ | -
|                                                                                   |                                                                | 2005                                    |         |         | 2004    |      |         | 2003    |        
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|                                                                                   |                                                                | ($ in thousands, except per share data) |        
|Revenues:                                                                          |                                                                |                                         |         |         |         |      |         |         |         |       |         |        
|                                                                                   | Rooms                                                          |                                         | $       | 241,441 |         |      | $       | 231,255 |         |       | $       | 221,543 |        
|                                                                                   | Food and beverage                                              |                                         |         | 67,715  |         |      |         | 70,631  |         |       |         | 69,016  |        
|                                                                                   | Other                                                          |                                         |         | 10,108  |         |      |         | 10,539  |         |       |         | 10,839  |        
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|                                                                                   |                                                                |                                         | 319,264 |         |         |      | 312,425 |         |         |       | 301,398 |        
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Operating expenses:                                                                |                                                                |                                         |         |         |         |      |         |         |         |       |         |        
|                                                                                   | Direct:                                                        |                                         |         |         |         |      |         |         |         |       |         |         |        
|                                                                                   |                                                                | Rooms                                   |         |         | 67,344  |      |         |         | 65,019  |       |         |         | 62,968  |       
|                                                                                   |                                                                | Food and beverage                       |         |         | 48,710  |      |         |         | 49,966  |       |         |         | 47,643  |       
|                                                                                   |                                                                | Other                                   |         |         | 8,050   |      |         |         | 7,907   |       |         |         | 7,799   |       
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|                                                                                   |                                                                |                                         | 124,104 |         |         |      | 122,892 |         |         |       | 118,410 |        
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|                                                                                   |                                                                |                                         | 195,160 |         |         |      | 189,533 |         |         |       | 182,988 |        
|Other operating expenses:                                                          |                                                                |                                         |         |         |         |      |         |         |         |       |         |        
|                                                                                   | Other hotel operating costs                                    |                                         |         | 100,420 |         |      |         | 93,116  |         |       |         | 88,430  |        
|                                                                                   | Property and other taxes, insurance, and leases                |                                         |         | 22,369  |         |      |         | 21,247  |         |       |         | 24,313  |        
|                                                                                   | Corporate and other                                            |                                         |         | 21,063  |         |      |         | 16,824  |         |       |         | 20,482  |        
|                                                                                   | Casualty (gains) losses, net                                   |                                         |         | (30,929 | )       |      |         | 2,313   |         |       |         |        |        
|                                                                                   | Depreciation and amortization                                  |                                         |         | 29,647  |         |      |         | 26,666  |         |       |         | 28,427  |        
|                                                                                   | Impairment of long-lived assets                                |                                         |         | 8,347   |         |      |         | 4,877   |         |       |         | 8,396   |        
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|                                                                                   |                                                                | Other operating expenses                |         |         | 150,917 |      |         |         | 165,043 |       |         |         | 170,048 |       
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|                                                                                   |                                                                |                                         | 44,243  |         |         |      | 24,490  |         |         |       | 12,940  |        
|Other income (expenses):                                                           |                                                                |                                         |         |         |         |      |         |         |         |       |         |        
|                                                                                   | Business interruption insurance proceeds                       |                                         |         | 9,595   |         |      |         |        |         |       |         |        |        
|                                                                                   | Interest income and other                                      |                                         |         | 855     |         |      |         | 681     |         |       |         | 807     |        
|                                                                                   | Gain on asset dispositions                                     |                                         |         |        |         |      |         |        |         |       |         | 445     |        
|                                                                                   | Interest expense and other financing costs:                    |                                         |         |         |         |      |         |         |         |       |         |         |        
|                                                                                   |                                                                | Preferred stock dividend                |         |         |        |      |         |         | (9,383  | )     |         |         | (8,092  | )     
|                                                                                   |                                                                | Interest expense                        |         |         | (27,675 | )    |         |         | (41,725 | )     |         |         | (27,626 | )     
|                                                                                   |                                                                | Loss on preferred stock redemption      |         |         |        |      |         |         | (6,063  | )     |         |         |        |       
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Income (loss) before income taxes, reorganization items and
    minority interests |                                                                |                                         | 27,018  |         |         |      | (32,000 | )       |         |       | (21,526 | )      
|Reorganization items                                                               |                                                                |                                         |        |         |         |      |        |         |         |       | (1,355  | )      
|Provision for income taxes  continuing operations                                 |                                                                |                                         | (6,981  | )       |         |      | (228    | )       |         |       | (178    | )      
|Minority interests (net of taxes, nil)                                             |                                                                |                                         | (9,588  | )       |         |      | 691     |         |         |       | 1,294   |        
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Income (loss) from continuing operations                                           |                                                                |                                         | 10,449  |         |         |      | (31,537 | )       |         |       | (21,765 | )      
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Discontinued operations:                                                           |                                                                |                                         |         |         |         |      |         |         |         |       |         |        
|                                                                                   | Income (loss) from discontinued operations before income taxes |                                         |         | 3,087   |         |      |         | (297    | )       |       |         | (9,912  | )      
|                                                                                   | Provision for income taxes                                     |                                         |         | (1,235  | )       |      |         |        |         |       |         |        |        
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Income (loss) from discontinued operations                                         |                                                                |                                         | 1,852   |         |         |      | (297    | )       |         |       | (9,912  | )      
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Net income (loss)                                                                  |                                                                |                                         | 12,301  |         |         |      | (31,834 | )       |         |       | (31,677 | )      
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Preferred stock dividend                                                           |                                                                |                                         |        |         |         |      |        |         |         |       | (7,594  | )      
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Net income (loss) attributable to common stock                                     |                                                                | $                                       | 12,301  |         |         | $    | (31,834 | )       |         | $     | (39,271 | )      
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|Net earnings (loss) per share attributable to common stock:                        |                                                                |                                         |         |         |         |      |         |         |         |       |         |        
|                                                                                   |                                                                |                                         | Basic   |         | $       | 0.50 |         |         | $       | (2.30 | )       |         | $       | (16.83 | )
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        
|                                                                                   |                                                                |                                         | Diluted |         | $       | 0.50 |         |         | $       | (2.30 | )       |         | $       | (16.83 | )
|                                                                                   |                                                                |                                         |         |         |         |      |         |         |        



F-4



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |        |   |  |   |      |   |  |   |         |         |  
|----------------------------------------------------------------------- | --------------------------------------------------------------------- | ----------------------------------- | ---------- | - | ---------- | - | --- | -------- |  | ----- | ------------ | ----------- | ------------- | ------- | ---- | -------------- | ------------ | - | ------- | ------------- | - | - | ------ | ----- |  | ------ | ------ | - |  | - | ---- | - |  | - | ------- | ------- | -
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              | Accumulated |               |         |      |                |              |   |        
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  | Other |              |             |               |         |     
|                                                                        |                                                                       | Common Stock                        |            |   | Additional |   |     | Unearned |  |       |              |             | Comprehensive |         |      | Treasury Stock |              |   | Total   |              
|                                                                        |                                                                       |                                     |            |   | Paid-In    |   |     | Stock    |  |       | Accumulated  |             |               | Income  |      |                |              |   |         | Stockholders |  
|                                                                        |                                                                       | Shares                              |            |   | Amount     |   |     | Capital  |  |       | Compensation |             |               | Deficit |      |                | (net of tax) |   |         | Shares        |   |   | Amount |       |  | Equity |       
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       
|                                                                        |                                                                       | ($ In thousands, except share data) |           
|Balance December 31, 2002                                               |                                                                       |                                     | 2,333,333  |   |            | $ | 23  |          |  | $     | 89,270       |             |               | $       |     |                |              | $ | (10,836 | )             |   | $ |       |       |  |        |       |   |  | $ |     |   |  | $ | 78,457  |        
|Issuance of restricted stock                                            |                                                                       |                                     |           |   |            |   |    |          |  |       | 600          |             |               |         | (600 | )              |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|Amortization of unearned stock compensation                             |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         | 92   |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 92      |        
|Exercise of stock options                                               |                                                                       |                                     | 258        |   |            |   |    |          |  |       | 4            |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 4       |        
|Comprehensive loss:                                                     |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |        |   |  |   |      |   |  |   |         |        
|                                                                        | Net loss                                                              |                                     |            |  |            |   |     |         |  |       |              |            |               |         |      |               |              |   |         | (31,677       | ) |   |        |      |  |        |        |  |  |   |      |  |  |   |         | (31,677 | )
|                                                                        | Currency translation adjustments (related taxes estimated
    at nil) |                                     |            |  |            |   |     |         |  |       |              |            |               |         |      |               |              |   |         |              |   |   |        | 1,324 |  |        |        |  |  |   |      |  |  |   |         | 1,324   |  
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       
|Total comprehensive loss                                                |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | (30,353 | )      
|Preferred dividends                                                     |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   | (7,594  | )             |   |   |       |       |  |        |       |   |  |   |     |   |  |   | (7,594  | )      
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       
|Balance December 31, 2003                                               |                                                                       |                                     | 2,333,591  |   |            | $ | 23  |          |  | $     | 89,874       |             |               | $       | (508 | )              |              | $ | (50,107 | )             |   | $ | 1,324  |       |  |        |       |   |  |   |     |   |  | $ | 40,606  |        
|Fractional shares cancelled on reverse stock split                      |                                                                       |                                     | (971       | ) |            |   |    |          |  |       | (5           | )           |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | (5      | )      
|Issuance of restricted stock                                            |                                                                       |                                     |           |   |            |   |    |          |  |       | 25           |             |               |         | (25  | )              |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|Issuance of new common shares                                           |                                                                       |                                     | 18,285,714 |   |            |   | 183 |          |  |       | 175,704      |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 175,887 |        
|Surrender of unexchanged shares                                         |                                                                       |                                     | (2,657     | ) |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|Amortization of unearned stock compensation                             |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         | 218  |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 218     |        
|Exercise of stock options                                               |                                                                       |                                     | 241        |   |            |   |    |          |  |       | 4            |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 4       |        
|Exchange of preferred shares for common shares                          |                                                                       |                                     | 3,941,115  |   |            |   | 40  |          |  |       | 41,341       |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 41,381  |        
|Vesting of restricted stock units                                       |                                                                       |                                     | 22,222     |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|Treasury stock                                                          |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        | 7,211  |   |  |   | (76  | ) |  |   | (76     | )      
|Comprehensive loss:                                                     |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |        |   |  |   |      |   |  |   |        |        
|Net loss                                                                |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   | (31,834 | )             |   |   |       |       |  |        |       |   |  |   |     |   |  |   | (31,834 | )      
|Currency translation                                                    |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|adjustments (related taxes estimated at nil)                            |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   | 453    |       |  |        |       |   |  |   |     |   |  |   | 453     |        
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       
|Total comprehensive loss                                                |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | (31,381 | )      
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       
|Balance December 31, 2004                                               |                                                                       |                                     | 24,579,255 |   |            | $ | 246 |          |  | $     | 306,943      |             |               | $       | (315 | )              |              | $ | (81,941 | )             |   | $ | 1,777  |       |  |        | 7,211  |   |  | $ | (76  | ) |  | $ | 226,634 |        
|Amortization of unearned stock compensation                             |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         | 494  |                |              |   |         |               |   |   |        |       |  |        |        |   |  |   |      |   |  |   | 494     |        
|Issuance of restricted shares                                           |                                                                       |                                     |           |   |            |   |    |          |  |       | 783          |             |               |         | (783 | )              |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|Vesting of restricted stock units                                       |                                                                       |                                     | 45,826     |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|Release of surplus accrual on final settlement of bankruptcy
    claims |                                                                       |                                     |           |   |            |   |    |          |  |       | 1,292        |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 1,292   |        
|Retirement of disputed claims shares                                    |                                                                       |                                     | (16,676    | ) |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   |        |        
|Exercise of Stock Options                                               |                                                                       |                                     | 40,000     |   |            |   |    |          |  |       | 361          |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 361     |        
|Treasury stock                                                          |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        | 14,422 |   |  |   | (150 | ) |  |   | (150    | )      
|Realization of pre-emergence deferred tax asset                         |                                                                       |                                     |           |   |            |   |    |          |  |       | 7,692        |             |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 7,692   |        
|Other                                                                   |                                                                       |                                     |           |   |            |   |    |          |  |       | (37          | )           |               |         |     |                |              |   |        |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | (37     | )      
|Comprehensive income:                                                   |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |        |   |  |   |      |   |  |   |         |        
|Net income                                                              |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   | 12,301  |               |   |   |       |       |  |        |       |   |  |   |     |   |  |   | 12,301  |        
|Currency translation adjustments (related taxes estimated at nil)       |                                                                       |                                     |           |   |            |   |    |          |  |       |             |             |               |         |     |                |              |   |        |               |   |   | 457    |       |  |        |       |   |  |   |     |   |  |   | 457     |        
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       
|Total comprehensive income                                              |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |        |   |  |   |      |   |  |   | 12,758  |        
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       
|Balance December 31, 2005                                               |                                                                       |                                     | 24,648,405 |   |            | $ | 246 |          |  | $     | 317,034      |             |               | $       | (604 | )              |              | $ | (69,640 | )             |   | $ | 2,234  |       |  |        | 21,633 |   |  | $ | (226 | ) |  | $ | 249,044 |        
|                                                                        |                                                                       |                                     |            |   |            |   |     |          |  |       |              |             |               |         |      |                |              |   |         |               |   |   |        |       |  |        |       



F-5



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |         |        |        |  
|------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------ | -------------------------------------- | ------- | ------- | ------ | ------- | -------- | ------ | ------ | ------- | ------- | ------ | ------ | -
|                                                                                |                                                                                              | 2005                                                   |                                        |         | 2004    |        |         | 2003     |       
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|                                                                                |                                                                                              | ($ in thousands)                                       |                                       
|Operating activities:                                                           |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |        
|                                                                                | Net income (loss)                                                                            |                                                        | $                                      | 12,301  |         |        | $       | (31,834  | )      |        | $       | (31,677 | )     
|                                                                                | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                        |                                        |         |         |        |         |          |        |        |         |         |       
|                                                                                |                                                                                              | Depreciation and amortization                          |                                        |         | 30,147  |        |         |          | 27,616 |        |         |         | 33,128 |       
|                                                                                |                                                                                              | Impairment of long-lived assets                        |                                        |         | 12,307  |        |         |          | 12,112 |        |         |         | 18,054 |       
|                                                                                |                                                                                              | Amortization of unearned stock compensation            |                                        |         | 494     |        |         |          | 218    |        |         |         | 92     |       
|                                                                                |                                                                                              | Preferred stock dividends                              |                                        |         |        |        |         |          | 9,383  |        |         |         | 8,092  |       
|                                                                                |                                                                                              | Loss on redemption of preferred stock                  |                                        |         |        |        |         |          | 6,063  |        |         |         |       |       
|                                                                                |                                                                                              | Casualty (gains) losses, net                           |                                        |         | (30,769 | )      |         |          | 2,313  |        |         |         |       |       
|                                                                                |                                                                                              | Deferred Income Taxes                                  |                                        |         | 7,692   |        |         |          |       |        |         |         |       |       
|                                                                                |                                                                                              | Minority interests                                     |                                        |         | 9,588   |        |         |          | (691   | )      |         |         | (1,296 | )     
|                                                                                |                                                                                              | Gain on asset dispositions                             |                                        |         | (6,872  | )      |         |          | (9,168 | )      |         |         | (3,530 | )     
|                                                                                |                                                                                              | Write-off and amortization of deferred financing costs |                                        |         | 942     |        |         |          | 11,210 |        |         |         | 4,916  |       
|                                                                                |                                                                                              | Other                                                  |                                        |         | (540    | )      |         |          | (125   | )      |         |         | (225   | )     
|                                                                                |                                                                                              | Changes in operating assets and liabilities:           |                                        |         |         |        |         |          |        |        |         |         |        |       
|                                                                                |                                                                                              |                                                        | Accounts receivable, net of allowances |         |         | (313   | )       |          |        | 958    |         |         |        | 1,262  |  
|                                                                                |                                                                                              |                                                        | Insurance receivable                   |         |         | (3,121 | )       |          |        |       |         |         |        |       |  
|                                                                                |                                                                                              |                                                        | Inventories                            |         |         | (526   | )       |          |        | (396   | )       |         |        | 285    |  
|                                                                                |                                                                                              |                                                        | Prepaid expenses and other assets      |         |         | (2,617 | )       |          |        | 291    |         |         |        | (2,808 | )
|                                                                                |                                                                                              |                                                        | Accounts payable                       |         |         | 58     |         |          |        | (181   | )       |         |        | (4,824 | )
|                                                                                |                                                                                              |                                                        | Other accrued liabilities              |         |         | (294   | )       |          |        | (1,330 | )       |         |        | (6,916 | )
|                                                                                |                                                                                              |                                                        | Advance deposits                       |         |         | 251    |         |          |        | (487   | )       |         |        | 486    |  
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Net cash provided by operating activities                                       |                                                                                              |                                                        | 28,728                                 |         |         |        | 25,952  |          |        |        | 15,039  |        
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Investing activities:                                                           |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |        
|                                                                                | Capital improvements                                                                         |                                                        |                                        | (86,476 | )       |        |         | (37,262  | )      |        |         | (35,434 | )     
|                                                                                | Proceeds from sale of assets, net of related selling costs                                   |                                                        |                                        | 36,396  |         |        |         | 42,493   |        |        |         | 13,145  |       
|                                                                                | Acquisitions of property and equipment                                                       |                                                        |                                        |        |         |        |         | (5,363   | )      |        |         |        |       
|                                                                                | (Deposits) withdrawals for capital expenditures                                              |                                                        |                                        | 15,361  |         |        |         | (18,990  | )      |        |         | 6,896   |       
|                                                                                | Insurance proceeds related to hurricanes                                                     |                                                        |                                        | 26,193  |         |        |         | 2,000    |        |        |         |        |       
|                                                                                | Net (increase) decrease in restricted cash                                                   |                                                        |                                        | (5,163  | )       |        |         | (2,756   | )      |        |         | 12,300  |       
|                                                                                | Other                                                                                        |                                                        |                                        | (99     | )       |        |         | (598     | )      |        |         | (261    | )     
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Net cash used in investing activities                                           |                                                                                              |                                                        | (13,788                                | )       |         |        | (20,476 | )        |        |        | (3,354  | )      
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Financing activities:                                                           |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |        
|                                                                                | Proceeds from issuance of long term debt                                                     |                                                        |                                        | 32,200  |         |        |         | 370,000  |        |        |         | 80,000  |       
|                                                                                | Proceeds from working capital revolver                                                       |                                                        |                                        |        |         |        |         |         |        |        |         | 2,000   |       
|                                                                                | Proceeds from exercise of stock options and issuance of common
    stock                     |                                                        |                                        | 361     |         |        |         | 175,890  |        |        |         | 114     |       
|                                                                                | Principal payments on long-term debt                                                         |                                                        |                                        | (63,612 | )       |        |         | (406,515 | )      |        |         | (87,059 | )     
|                                                                                | Principal payments on working capital revolver                                               |                                                        |                                        |        |         |        |         |         |        |        |         | (2,000  | )     
|                                                                                | Shares redeemed from reverse stock split                                                     |                                                        |                                        |        |         |        |         | (5       | )      |        |         |        |       
|                                                                                | Preferred stock redemption                                                                   |                                                        |                                        |        |         |        |         | (114,043 | )      |        |         |        |       
|                                                                                | Purchase of treasury stock                                                                   |                                                        |                                        | (150    | )       |        |         | (76      | )      |        |         |        |       
|                                                                                | Payments of deferred financing costs                                                         |                                                        |                                        | (913    | )       |        |         | (5,417   | )      |        |         | (4,839  | )     
|                                                                                | Other                                                                                        |                                                        |                                        | (37     | )       |        |         |         |        |        |         |        |       
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Net cash (used in) provided by financing activities                             |                                                                                              |                                                        | (32,151                                | )       |         |        | 19,834  |          |        |        | (11,784 | )      
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Effect of exchange rate changes on cash                                         |                                                                                              |                                                        | 74                                     |         |         |        | 27      |          |        |        | 121     |        
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Net (decrease) increase in cash and cash equivalents                            |                                                                                              |                                                        | (17,137                                | )       |         |        | 25,337  |          |        |        | 22      |        
|Cash and cash equivalents at beginning of year                                  |                                                                                              |                                                        | 36,234                                 |         |         |        | 10,897  |          |        |        | 10,875  |        
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Cash and cash equivalents at end of year                                        |                                                                                              | $                                                      | 19,097                                 |         |         | $      | 36,234  |          |        | $      | 10,897  |        
|                                                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |       
|Supplemental cash flow information:                                             |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |        
|Cash paid during the period for:                                                |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |        
|                                                                                | Interest, net of the amounts capitalized shown below                                         |                                                        | $                                      | 27,154  |         |        | $       | 35,010   |        |        | $       | 28,660  |       
|                                                                                | Interest capitalized                                                                         |                                                        |                                        | 2,121   |         |        |         | 800      |        |        |         | 1,181   |       
|                                                                                | Income taxes, net of refunds                                                                 |                                                        |                                        | 902     |         |        |         | 483      |        |        |         | 237     |       
|Supplemental disclosure of non-cash investing and financing
    activities:     |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |        
|                                                                                | Exchange of preferred shares for common shares                                               |                                                        |                                        |        |         |        |         | 41,381   |        |        |         |        |       
|                                                                                | Net non-cash debt increase                                                                   |                                                        |                                        | 1,277   |         |        |         | 3,187    |        |        |         | 4,678   |       
|                                                                                | Equipment acquired through capital lease obligations                                         |                                                        |                                        |        |         |        |         | 51       |        |        |         |        |       
|                                                                                | Release of surplus accrual on final settlement of bankruptcy
    claims                      |                                                        |                                        | 1,292   |         |        |         |         |        |        |         |        |       
|                                                                                | Purchases of property and equipment on account                                               |                                                        |                                        | 3,330   |         |        |         | 4,532    |        |        |         | (1,210  | )     
|Operating cash receipts and payments resulting from
    Chapter 11 proceedings: |                                                                                              |                                                        |                                        |         |         |        |         |          |        |        |         |        
|                                                                                | Professional fees paid                                                                       |                                                        |                                        |        |         |        |         |         |        |        |         | (455    | )     
|                                                                                | Loan extension fee                                                                           |                                                        |                                        |        |         |        |         |         |        |        |         | (1,500  | )     
|                                                                                | Other reorganization payments                                                                |                                                        |                                        |        |         |        |         |         |        |        |         | (90     | )     



F-6



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2005




|   |                                           
|-- | ------------------------------------------
|1. | Summary of Significant Accounting Policies



| |                        
| | -----------------------
| | Description of Business









| |                            
| | ---------------------------
| | Principles of Consolidation





| |   |                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Melbourne Hospitality Associates, Limited Partnership (which
    owns the Crowne Plaza Melbourne, Florida)  This
    joint venture is in the form of a limited partnership, in which
    a Lodgian subsidiary serves as the general partner and has a 50%
    voting interest.            
|
| |  | New Orleans Airport Motel Associates, Ltd. (which owns the
    Radisson New Orleans Airport Hotel, Kenner,
    Louisiana)  This joint venture is in the form of
    a limited partnership, in which a Lodgian subsidiary serves as
    the general partner and has an 82% voting interest.

F-7



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |   |                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Servico Centre Associates, Ltd. (which owns the Crowne Plaza
    West Palm Beach, Florida)  This joint venture is
    in the form of a limited partnership, in which a Lodgian
    subsidiary serves as the general partner and has a 50% voting
    interest.
|
| |  | McKnight Motel, Inc. (which owns the Holiday Inn McKnight
    Pittsburgh, Pennsylvania)  This joint venture is
    in the form of a limited partnership, in which a Lodgian
    subsidiary serves as the limited partner and has a 50% voting
    interest.   









| |            
| | -----------
| | Inventories







| |                   
| | ------------------
| | Minority Interests





| |                       
| | ----------------------
| | Property and Equipment





F-8



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                      
| | ---------------------
| | Acquisition of Hotels





| |                                                 
| | ------------------------------------------------
| | Assets Held for Sale and Discontinued Operations





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | a) Management commits to a plan to sell the asset;                                         
|
| | b) The asset is available for immediate sale in its present
    condition;                 
|
| | c) An active marketing plan to sell the asset has been
    initiated at a reasonable price;
|
| | d) The sale of the asset is probable within one
    year; and                              
|
| | e) It is unlikely that significant changes to the plan to
    sell the asset will be made. 







| |                          
| | -------------------------
| | Cash and Cash Equivalents



Restricted Cash






| |                                     
| | ------------------------------------
| | Fair Values of Financial Instruments





F-9



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |                             
| | ----------------------------
| | Concentration of Credit Risk





| |                             
| | ----------------------------
| | Concentration of Market Risk





| |             
| | ------------
| | Income Taxes





| |                         
| | ------------------------
| | Statements of Cash Flows







| |                                                
| | -----------------------------------------------
| | Earnings per Common and Common Equivalent Share



F-10



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |                         
| | ------------------------
| | Stock-Based Compensation









|                                            |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |         |  
|------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------- | -
|                                            |                                                                                           | Year Ended                          |   |        | Year Ended        |  |   | Year Ended        |  
|                                            |                                                                                           | December 31, 2005                   |   |        | December 31, 2004 |  |   | December 31, 2003 |  
|                                            |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                            |                                                                                           | ($ in thousands, except share data) |  
|Income (loss) from continuing operations:   |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                            | As reported                                                                               |                                     | $ | 10,449 |                   |  | $ | (31,537           | ) |  | $ | (21,765 | )
|                                            | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 302    |                   |  |   | 218               |   |  |   | 92      |  
|                                            | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (1,354 | )                 |  |   | (1,155            | ) |  |   | (705    | )
|                                            |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                            | Pro forma                                                                                 |                                     |   | 9,397  |                   |  |   | (32,474           | ) |  |   | (22,378 | )
|                                           
|Income (loss) from discontinued operations: |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                            | As reported                                                                               |                                     |   | 1,852  |                   |  |   | (297              | ) |  |   | (9,912  | )
|                                            | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   |       |                   |  |   |                  |   |  |   |        |  
|                                            | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   |       |                   |  |   |                  |   |  |   |        |  
|                                            |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                            | Pro forma                                                                                 |                                     |   | 1,852  |                   |  |   | (297              | ) |  |   | (9,912  | )

F-11



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |         |  
|----------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------- | -
|                                                |                                                                                           | Year Ended                          |   |        | Year Ended        |  |   | Year Ended        |  
|                                                |                                                                                           | December 31, 2005                   |   |        | December 31, 2004 |  |   | December 31, 2003 |  
|                                                |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                                |                                                                                           | ($ in thousands, except share data) |  
|Net income (loss):                              |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                                | As reported                                                                               |                                     |   | 12,301 |                   |  |   | (31,834           | ) |  |   | (31,677 | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 302    |                   |  |   | 218               |   |  |   | 92      |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (1,354 | )                 |  |   | (1,155            | ) |  |   | (705    | )
|                                                |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 11,249 |                   |  |   | (32,771           | ) |  |   | (32,290 | )
|Net income (loss) attributable to common stock: |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                                | As reported                                                                               |                                     |   | 12,301 |                   |  |   | (31,834           | ) |  |   | (39,271 | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 302    |                   |  |   | 218               |   |  |   | 92      |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (1,354 | )                 |  |   | (1,155            | ) |  |   | (705    | )
|                                                |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 11,249 |                   |  |   | (32,771           | ) |  |   | (39,884 | )
|                                               
|Basic earnings (loss) per common share:         |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                               
|Income (loss) from continuing operations:       |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                                | As reported                                                                               |                                     | $ | 0.42   |                   |  | $ | (2.28             | ) |  | $ | (9.33   | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 0.01   |                   |  |   | 0.02              |   |  |   | 0.04    |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (0.06  | )                 |  |   | (0.08             | ) |  |   | (0.30   | )
|                                                |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.37   |                   |  |   | (2.34             | ) |  |   | (9.59   | )
|                                               
|Income (loss) from discontinued operations:     |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                                | As reported                                                                               |                                     |   | 0.08   |                   |  |   | (0.02             | ) |  |   | (4.25   | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   |       |                   |  |   |                  |   |  |   |        |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   |       |                   |  |   |                  |   |  |   |        |  
|                                                |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.08   |                   |  |   | (0.02             | ) |  |   | (4.25   | )
|                                               
|Net income (loss):                              |                                                                                           |                                     |   |        |                   |  |   |                   |   |  |   |        
|                                                | As reported                                                                               |                                     |   | 0.50   |                   |  |   | (2.30             | ) |  |   | (13.58  | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 0.01   |                   |  |   | 0.02              |   |  |   | 0.04    |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (0.06  | )                 |  |   | (0.08             | ) |  |   | (0.30   | )
|                                                |                                                                                           |                                     |   |        |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.45   |                   |  |   | (2.36             | ) |  |   | (13.84  | )

F-12



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                |                                                                                           |                                     |   |       |                   |  |   |                   |   |  |   |        |  
|----------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------- | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                |                                                                                           | Year Ended                          |   |       | Year Ended        |  |   | Year Ended        |  
|                                                |                                                                                           | December 31, 2005                   |   |       | December 31, 2004 |  |   | December 31, 2003 |  
|                                                |                                                                                           |                                     |   |       |                   |  |   |                   |  
|                                                |                                                                                           | ($ in thousands, except share data) |  
|Net income (loss) attributable to common stock: |                                                                                           |                                     |   |       |                   |  |   |                   |   |  |   |       
|                                                | As reported                                                                               |                                     |   | 0.50  |                   |  |   | (2.30             | ) |  |   | (16.83 | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 0.01  |                   |  |   | 0.02              |   |  |   | 0.04   |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (0.06 | )                 |  |   | (0.08             | ) |  |   | (0.30  | )
|                                                |                                                                                           |                                     |   |       |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.45  |                   |  |   | (2.36             | ) |  |   | (17.09 | )
|                                               
|Diluted earnings (loss) per common share:       |                                                                                           |                                     |   |       |                   |  |   |                   |   |  |   |       
|                                               
|Income (loss) from continuing operations:       |                                                                                           |                                     |   |       |                   |  |   |                   |   |  |   |       
|                                                | As reported                                                                               |                                     | $ | 0.42  |                   |  | $ | (2.28             | ) |  | $ | (9.33  | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 0.01  |                   |  |   | 0.02              |   |  |   | 0.04   |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (0.06 | )                 |  |   | (0.08             | ) |  |   | (0.30  | )
|                                                |                                                                                           |                                     |   |       |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.37  |                   |  |   | (2.34             | ) |  |   | (9.59  | )
|                                               
|Income (loss) from discontinued operations:     |                                                                                           |                                     |   |       |                   |  |   |                   |   |  |   |       
|                                                | As reported                                                                               |                                     |   | 0.08  |                   |  |   | (0.02             | ) |  |   | (4.25  | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   |      |                   |  |   |                  |   |  |   |       |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   |      |                   |  |   |                  |   |  |   |       |  
|                                                |                                                                                           |                                     |   |       |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.08  |                   |  |   | (0.02             | ) |  |   | (4.25  | )
|                                               
|Net income (loss):                              |                                                                                           |                                     |   |       |                   |  |   |                   |   |  |   |       
|                                                | As reported                                                                               |                                     |   | 0.50  |                   |  |   | (2.30             | ) |  |   | (13.58 | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 0.01  |                   |  |   | 0.02              |   |  |   | 0.04   |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (0.06 | )                 |  |   | (0.08             | ) |  |   | (0.30  | )
|                                                |                                                                                           |                                     |   |       |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.45  |                   |  |   | (2.36             | ) |  |   | (13.84 | )
|                                               
|Net income (loss) attributable to common stock: |                                                                                           |                                     |   |       |                   |  |   |                   |   |  |   |       
|                                                | As reported                                                                               |                                     |   | 0.50  |                   |  |   | (2.30             | ) |  |   | (16.83 | )
|                                                | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                                     |   | 0.01  |                   |  |   | 0.02              |   |  |   | 0.04   |  
|                                                | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                                     |   | (0.06 | )                 |  |   | (0.08             | ) |  |   | (0.30  | )
|                                                |                                                                                           |                                     |   |       |                   |  |   |                   |  
|                                                | Pro forma                                                                                 |                                     |   | 0.45  |                   |  |   | (2.36             | ) |  |   | (17.09 | )



| |                    
| | -------------------
| | Revenue Recognition



F-13



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                   
| | ------------------
| | Operating Segments





| |                 
| | ----------------
| | Use of Estimates





| |               
| | --------------
| | Self-insurance





| |                              
| | -----------------------------
| | New Accounting Pronouncements





F-14



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)












|   |                         
|-- | ------------------------
|2. | Stock-Based Compensation



F-15



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                                       |  |                |          |   |      |                  |                        |  |           | 
|---------------------------------------------------------------------- |  | -------------- | -------- | - | ---- | ---------------- | ---------------------- |  | --------- | 
|                                                                       |  | Issued Under   |          |   |      |                  | Available for Issuance | 
|                                                                       |  | the Stock      |          |   |      |                  | Under the Stock        | 
|                                                                       |  | Incentive Plan |          |   | Type |                  | Incentive Plan         | 
|                                                                       |  |                |          |   |      |                  |                        | 
|Available under the plan, less previously issued                       |  |                |          |   |      |                  |                        |  | 2,713,314 | 
|Issued  January 31, 2005                                              |  |                | 25,000   |   |      | stock options    |                        |  | 2,688,314 | 
|Issued  February 28, 2005                                             |  |                | 7,500    |   |      | stock options    |                        |  | 2,680,814 | 
|Issued  April 18, 2005                                                |  |                | 2,500    |   |      | stock options    |                        |  | 2,678,314 | 
|Issued  May 9, 2005                                                   |  |                | 392,500  |   |      | stock options    |                        |  | 2,285,814 | 
|Issued  July 15, 2005                                                 |  |                | 75,000   |   |      | restricted stock |                        |  | 2,210,814 | 
|Issued  September 8, 2005                                             |  |                | 2,500    |   |      | stock options    |                        |  | 2,208,314 | 
|Issued  September 26, 2005                                            |  |                | 5,000    |   |      | stock options    |                        |  | 2,203,314 | 
|Issued  December 29, 2005                                             |  |                | 5,000    |   |      | stock options    |                        |  | 2,198,314 | 
|Options forfeited in 2005                                              |  |                | (332,516 | ) |      |                  |                        |  | 2,530,830 | 
|Shares withheld from awards to satisfy tax withholding
    obligations |  |                | (14,422  | ) |      |                  |                        |  | 2,545,252 | 
|                                                                       |  |                |          |   |      |                  |                        | 
|                                                                       |  |                | 168,062  |   |      |                  |                        |  |           | 
|                                                                       |  |                |          |   |      |                  |                        | 















F-16



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                           |           |         |         |                  |                |   |       |       | 
|-------------------------- | --------- | ------- | ------- | ---------------- | -------------- | - | ----- | ----- | 
|                           |           |         |         | Weighted Average |               
|                           |           | Options |         |                  | Exercise Price |  
|                           |           |         |         |                  |                |  
|Balance, December 31, 2002 |           |         |        |                  |                |   |      |      
|                           | Granted   |         |         | 157,785          |                |   | $     | 13.92 | 
|                           | Exercised |         |         | (258             | )              |   |       | 15.21 | 
|                           | Forfeited |         |         |                 |                |   |       |      | 
|                           |           |         |         |                  |                |  
|Balance, December 31, 2003 |           |         | 157,527 |                  |                | $ | 13.92 |      
|                           | Granted   |         |         | 383,500          |                |   |       | 10.52 | 
|                           | Exercised |         |         | (239             | )              |   |       | 15.21 | 
|                           | Forfeited |         |         | (14,378          | )              |   |       | 13.42 | 
|                           |           |         |         |                  |                |  
|Balance, December 31, 2004 |           |         | 526,410 |                  |                | $ | 11.46 |      
|                           | Granted   |         |         | 440,000          |                |   |       | 9.29  | 
|                           | Exercised |         |         | (40,000          | )              |   |       | 9.05  | 
|                           | Forfeited |         |         | (332,516         | )              |   |       | 10.75 | 
|                           |           |         |         |                  |                |  
|Balance, December 31, 2005 |           |         | 593,894 |                  |                | $ | 10.41 |      
|                           |           |         |         |                  |                |  

|                           |                                        |             |         |          |              |  |        |        |    
|-------------------------- | -------------------------------------- | ----------- | ------- | -------- | ------------ |  | ------ | ------ | ---
|                           |                                        | Restricted  |         |          | Restricted   | 
|                           |                                        | Stock Units |         |          | Stock Shares | 
|                           |                                        |             |         |          |              | 
|Balance, December 31, 2002 |                                        |             |        |          |              |  |       |       
|                           | Granted                                |             |         | 200,000  |              |  |        |       |    
|                           | Units converted to common stock        |             |         |         |              |  |        |       |    
|                           | Forfeited                              |             |         |         |              |  |        |       |    
|                           |                                        |             |         |          |              | 
|Balance, December 31, 2003 |                                        |             | 200,000 | (1)      |              |  |       |       
|                           | Adjustment for 3:1 reverse stock split |             |         | (133,333 | )(1)         |  |        |       |    
|                           | Granted                                |             |         | 1,382    |              |  |        |       |    
|                           | Units converted to common stock        |             |         | (22,222  | )(2)         |  |        |       |    
|                           | Forfeited                              |             |         |         |              |  |        |       |    
|                           |                                        |             |         |          |              | 
|Balance, December 31, 2004 |                                        |             | 45,827  |          |              |  |       |       
|                           | Granted                                |             |         |          |              |  |        | 75,000 | (3)
|                           | Units converted to common stock        |             |         | (45,826  | )(2)         |  |        |       |    
|                           | Unit lost due to 1:3 stock split       |             |         | (1       | )            |  |        |       |    
|                           | Forfeited                              |             |         |         |              |  |        |       |    
|                           |                                        |             |         |          |              | 
|Balance, December 31, 2005 |                                        |             | (0      | )        |              |  | 75,000 |       
|                           |                                        |             |         |          |              | 






|    |                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | At December 31, 2003 and December 31, 2002, none of
    the restricted stock units had vested.                                                                                                                                                          
|   
|(2) | For the years ended December 31, 2005, December 31,
    2004 and December 31, 2003, 68,048, 22,222, and zero
    restricted stock units had vested, respectively.                                                                                       
|   
|(3) | On July 15, 2005, we issued our president and chief
    executive officer, Edward Rohling, 75,000 restricted stock
    shares in accordance with his employment agreement. At
    December 31, 2005, none of the restricted stock shares had
    vested.

F-17



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                |                  |                     |        |                  |                     |                           |                  |  |                |  |  |                  |       |  |                |  |         |  |  |   |       | 
|--------------- | ---------------- | ------------------- | ------ | ---------------- | ------------------- | ------------------------- | ---------------- |  | -------------- |  |  | ---------------- | ----- |  | -------------- |  | ------- |  |  | - | ----- | 
|                |                  | Options outstanding |        |                  | Options exercisable |                          
|                |                  |                     |        |                  |                     |                          
|                |                  |                     |        | Weighted average |                     |                           | Weighted Average |  |                |  |  | Weighted Average |      
|Range of prices |                  |                     | Number |                  |                     | remaining life (in years) |                  |  | Exercise Price |  |  | Number           |       |  | Exercise Price | 
|                |                  |                     |        |                  |                     |                           |                  |  |                |  |  |                  |       |  |                | 
|                | $ 7.83 to $ 9.39 |                     |        |                  | 271,000             |                           |                  |  | 9.3            |  |  | $                | 9.05  |  |                |  |        |  |  | $ | 0.00  | 
|                | $ 9.40 to $10.96 |                     |        |                  | 250,916             |                           |                  |  | 8.4            |  |  | $                | 10.51 |  |                |  | 82,222  |  |  | $ | 10.52 | 
|                | $10.97 to $15.66 |                     |        |                  | 71,978              |                           |                  |  | 7.6            |  |  | $                | 15.21 |  |                |  | 71,978  |  |  | $ | 15.21 | 
|                |                  |                     |        |                  |                     |                           |                  |  |                |  |  |                  |       |  |                | 
|                |                  |                     |        |                  | 593,894             |                           |                  |  | 8.7            |  |  | $                | 10.41 |  |                |  | 154,200 |  |  | $ | 12.71 | 
|                |                  |                     |        |                  |                     |                           |                  |  |                |  |  |                  |       |  |                | 







|                        |  |                   |          |   |                   |  |          |                   |  |  |          |  
|----------------------- |  | ----------------- | -------- | - | ----------------- |  | -------- | ----------------- |  |  | -------- | -
|                        |  | Year Ended        |          |   | Year Ended        |  |          | Year Ended        | 
|                        |  | December 31, 2005 |          |   | December 31, 2004 |  |          | December 31, 2003 | 
|                        |  |                   |          |   |                   |  |          |                   | 
|Expected life of option |  |                   | 10 years |   |                   |  | 10 years |                   |  |  | 10 years |  
|Risk free interest rate |  |                   | 4.56     | % |                   |  | 4.09     | %                 |  |  | 4.09     | %
|Expected volatility     |  |                   | 22.80    | % |                   |  | 55.74    | %                 |  |  | 55.75    | %
|Expected dividend yield |  |                   |         |   |                   |  |         |                   |  |  |         |  



|                                               |  |                   |           |  |                   |   |           |                   |  |   |           | 
|---------------------------------------------- |  | ----------------- | --------- |  | ----------------- | - | --------- | ----------------- |  | - | --------- | 
|                                               |  | Year Ended        |           |  | Year Ended        |   |           | Year Ended        | 
|                                               |  | December 31, 2005 |           |  | December 31, 2004 |   |           | December 31, 2003 | 
|                                               |  |                   |           |  |                   |   |           |                   | 
|Weighted average fair value of options granted |  | $                 | 4.21      |  |                   | $ | 7.32      |                   |  | $ | 9.67      | 
|Total number of options granted                |  |                   | 440,000   |  |                   |   | 383,500   |                   |  |   | 157,784   | 
|Total fair value of all options granted        |  | $                 | 1,852,400 |  |                   | $ | 2,807,067 |                   |  | $ | 1,526,434 | 



|   |                        
|-- | -----------------------
|3. | Discontinued Operations







| |    |                                                                                         
| | -- | ----------------------------------------------------------------------------------------
| | a) | Management commits to a plan to sell the asset;                                         
|
| | b) | The asset is available for immediate sale in its present
    condition;                 
|
| | c) | An active marketing plan to sell the asset at a reasonable price
    has been initiated;

F-18



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |    |                                                       
| | -- | ------------------------------------------------------
| | d) | The sale of the asset is probable within one year; and



| |    |                                                                                        
| | -- | ---------------------------------------------------------------------------------------
| | e) | It is unlikely that significant changes to the plan to sell the
    asset will be made.











| |    |                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | an additional $0.3 million on the Holiday Inn Express
    Gadsden, AL to reflect the estimated selling costs of this sale
    as the hotel was identified for sale in January 2005 and 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;
|
| | b) | an additional $1.6 million on the Holiday Inn Rolling
    Meadows, IL to reflect the lowered selling price of the hotel;                                                                                                                                                                                                                                                            
|
| | c) | an additional $0.3 million on the Holiday Inn Morgantown,
    WV to reflect the reduced selling price and the additional
    charges to dispose of this hotel in February 2005;                                                                                                                                                                                                     
|
| | d) | an additional $0.4 million on the Mt. Laurel, NJ land
    parcel to reflect the lowered estimated selling price of the
    land parcel;                                                                                                                                                                                                                                             
|
| | e) | $1.3 million on the Holiday Inn St. Louis, MO to
    reflect the reduced selling price of the hotel; and                                                                                                                                                                                                                                                                            

F-19



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |    |                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | f) | $0.1 million on the Holiday Inn McKnight Pittsburgh, PA as
    the hotel was identified for sale in the fourth quarter 2005 and
    its carrying value was adjusted to the hotels selling
    price less selling costs.





| |    |                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | an additional $0.1 million on the Holiday Inn Express
    Pensacola, FL to reflect the loss recorded on sale of this hotel
    in March 2004;                                                                                                                                                                                                                                                   
|
| | b) | an additional $0.5 million on the downtown Plaza Hotel
    Cincinnati, OH to reflect the lowered estimated selling price of
    the hotel and the loss recorded on sale of the hotel in April
    2004;                                                                                                                                                                                         
|
| | c) | an additional $0.4 million on the Holiday Inn Morgantown,
    WV as capital improvements were spent on this hotel for
    franchise compliance that did not add incremental value or
    revenue generating capacity to the property;                                                                                                                                                           
|
| | d) | an additional $0.7 million on the Holiday Inn Memphis, TN
    to reflect the reduced selling price and additional charges to
    dispose of this hotel in December 2004;                                                                                                                                                                                                                        
|
| | e) | an additional $1.0 million on the Holiday Inn Austin
    (South), TX to reflect a reduction in the estimated selling
    price due to feedback from potential buyers that this hotel had
    limited future franchise options due to its exterior corridors;                                                                                                                                    
|
| | f) | $1.7 million on the Holiday Inn Rolling Meadows, IL to
    record the difference between the estimated selling price and
    the carrying value of this hotel consistent with an offer
    received on the hotel;                                                                                                                                                                               
|
| | g) | $0.3 million on the Holiday Inn Florence, KY primarily
    related to disposal costs incurred on sale of the hotel in
    December 2004;                                                                                                                                                                                                                                                        
|
| | h) | $1.1 million on the Holiday Inn Express Gadsden, AL as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets carrying value. The
    estimated selling price of this hotel was negatively impacted by
    its franchise agreement expiring in August 2005 and the
    franchisor indicating that it will not renew the agreement;
|
| | i) | $0.9 million on the Holiday Inn St. Louis, MO as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets previously adjusted
    carrying value;                                                                                                                                                                                   
|
| | j) | $0.6 million on the Quality Inn Hotel & Conference
    Center Metairie, LA as capital improvements were spent on health
    and safety items that added no incremental market value or
    revenue generating capacity at this hotel, resulting in the
    recording of impairment to bring the assets carrying value
    in line with the fair value; and                                     
|
| | k) | additional adjustments on four other assets aggregating to a
    reduction of impairment charges of $0.1 million.                                                                                                                                                                                                                                                                               





| |    |                                                                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $1.1 million on the Holiday Inn Express Pensacola, FL as
    this hotel was identified for sale in the second quarter 2003.
    The performance of this hotel was negatively impacted in 2003 by
    the opening of three new hotels in its market and the conversion
    of another fully renovated hotel to the Holiday Inn Express
    brand in April 2003;
|
| | b) | $1.0 million on the Downtown Plaza Hotel Cincinnati, OH as
    this hotel was listed for sale in the second quarter 2003.
    Operating profits decreased more than forecast at this hotel
    following the loss of its franchise affiliation in May 2003;                                                                                                   

F-20



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) | $0.8 million on the Holiday Inn Morgantown, WV as this
    hotel was identified for sale in the second quarter 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the fourth quarter of 2003 the
    expected selling price of this hotel was lowered as a result of
    the opening of a Radisson hotel in the market, which negatively
    impacted the operating results of this hotel;                                                
|
| | d) | $0.6 million on the Holiday Inn Fort Mitchell, KY as this
    hotel was identified for sale in the second quarter 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the third quarter of 2003 it was
    determined with the broker that the selling price needed to be
    lowered to find a willing buyer, resulting in an impairment
    charge;                                                                                      
|
| | e) | $0.6 million on the land parcel in Mt. Laurel, NJ as this
    property was identified for sale in the second quarter of 2003.
    During the sales process the broker recommended a price
    reduction which resulted in $0.6 million of impairment
    charges;                                                                                                                                                                                                                         
|
| | f) | $0.6 million on the Holiday Inn Market Center Dallas, TX as
    this hotel was identified for sale in the second quarter 2003 at
    which time $0.6 million of impairment was recorded. The
    reduction in value was primarily related to the
    franchisors decision to not transfer the franchise
    agreement on this hotel to a new buyer. This hotel was sold in
    January 2004 for net proceeds of $2.5 million compared to
    its adjusted net book value of $2.4 million;
|
| | g) | $0.3 million on the Holiday Inn Memphis, TN as this hotel
    was identified for sale in the second quarter of 2003 at which
    time, based on the anticipated selling price, no impairment was
    required. In the third quarter of 2003 it was determined by the
    broker that it was advisable that the selling price should be
    lowered because the franchise agreement was not going to be
    renewed;                                                                       
|
| | h) | $0.1 million on the Holiday Inn Austin (South), TX as this
    hotel was identified for sale in the second quarter of 2003 at
    which time impairment was recorded based on a listing
    brokers evaluation of the hotel;                                                                                                                                                                                                                                                             
|
| | i) | $0.1 million on the land parcel in Fayetteville, NC as this
    property was identified for sale in the second quarter of 2003
    at which time, based on the anticipated selling price, no
    impairment was required. In the third quarter 2003 the listing
    broker determined it was advisable to lower the asking price
    which resulted in an impairment charge;                                                                                                              
|
| | j) | $2.5 million on the Holiday Inn St. Louis North, MO
    because the nearby airport renovations drastically changed the
    ingress and egress of this hotel thereby significantly lowering
    the financial performance of this hotel; and                                                                                                                                                                                                                                               
|
| | k) | $1.8 million on the Quality Hotel & Conference Center
    Metairie, LA because of a significant decline in this
    hotels group room business because this hotel is in need
    of a major renovation, which the company had previously planned
    but subsequently discarded due to an inadequate expected return
    on investment. Transient business has also declined, resulting
    in reduced operating profits which led to the recording of
    impairment.                   

F-21



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                            |  |                   |        |  |                   |   |        | 
|--------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | 
|                            |  | December 31, 2005 |        |  | December 31, 2004 |  
|                            |  |                   |        |  |                   |  
|                            |  | ($ in thousands)  |       
|Property and equipment, net |  | $                 | 13,796 |  |                   | $ | 28,389 | 
|Other assets                |  |                   | 1,070  |  |                   |   | 2,170  | 
|                            |  |                   |        |  |                   |  
|Total Assets                |  | $                 | 14,866 |  |                   | $ | 30,559 | 
|                            |  |                   |        |  |                   |  
|Other liabilities           |  | $                 | 3,346  |  |                   | $ | 3,311  | 
|Long-term debt              |  |                   | 1,264  |  |                   |   | 27,261 | 
|                            |  |                   |        |  |                   |  
|Total Liabilities           |  | $                 | 4,610  |  |                   | $ | 30,572 | 
|                            |  |                   |        |  |                   |  



|                                           |  |                  |        |   |      |   |        |      |  |   |        |  
|------------------------------------------ |  | ---------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                           |  | 2005             |        |   | 2004 |   |        | 2003 | 
|                                           |  |                  |        |   |      |   |        |      | 
|                                           |  | ($ in thousands) |       
|Total revenues                             |  | $                | 20,963 |   |      | $ | 47,883 |      |  | $ | 71,153 |  
|Total expenses                             |  |                  | 19,952 |   |      |   | 44,159 |      |  |   | 69,586 |  
|Impairment of long-lived assets            |  |                  | 3,960  |   |      |   | 7,235  |      |  |   | 9,658  |  
|Interest income and other                  |  |                  | 286    |   |      |   | 50     |      |  |   |       |  
|Interest expense and other financing costs |  |                  | (1,122 | ) |      |   | (6,004 | )    |  |   | (4,906 | )
|Gain on asset disposition                  |  |                  | 6,872  |   |      |   | 9,168  |      |  |   | 3,085  |  
|Provision for income taxes                 |  |                  | (1,235 | ) |      |   |       |      |  |   |       |  
|                                           |  |                  |        |   |      |   |        |      | 
|Income (loss) from discontinued operations |  | $                | 1,852  |   |      | $ | (297   | )    |  | $ | (9,912 | )
|                                           |  |                  |        |   |      |   |        |      | 





|   |                    
|-- | -------------------
|4. | Accounts Receivable



|                                |  |                   |        |   |                   |   |       |  
|------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ----- | -
|                                |  | December 31, 2005 |        |   | December 31, 2004 |  
|                                |  |                   |        |   |                   |  
|                                |  | ($ in thousands)  |       
|Trade accounts receivable       |  | $                 | 8,205  |   |                   | $ | 7,664 |  
|Allowance for doubtful accounts |  |                   | (1,101 | ) |                   |   | (684  | )
|Other receivables               |  |                   | 950    |   |                   |   | 987   |  
|                                |  |                   |        |   |                   |  
|                                |  | $                 | 8,054  |   |                   | $ | 7,967 |  
|                                |  |                   |        |   |                   |  

F-22



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                                          
|-- | -----------------------------------------
|5. | Prepaid Expenses and Other Current Assets



|                                    |  |                   |        |  |                   |   |        | 
|----------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | 
|                                    |  | December 31, 2005 |        |  | December 31, 2004 |  
|                                    |  |                   |        |  |                   |  
|                                    |  | ($ in thousands)  |       
|Deposit for property taxes          |  | $                 | 7,552  |  |                   | $ | 5,745  | 
|Prepaid insurance                   |  |                   | 3,244  |  |                   |   | 3,730  | 
|Lender-required insurance deposits  |  |                   | 3,489  |  |                   |   | 3,560  | 
|Deposits and other prepaid expenses |  |                   | 5,816  |  |                   |   | 4,507  | 
|                                    |  |                   |        |  |                   |  
|                                    |  | $                 | 20,101 |  |                   | $ | 17,542 | 
|                                    |  |                   |        |  |                   |  



|   |                       
|-- | ----------------------
|6. | Property and Equipment



|                              |  |              |       |                  |              |   |         |              |  |   |         |  
|----------------------------- |  | ------------ | ----- | ---------------- | ------------ | - | ------- | ------------ |  | - | ------- | -
|                              |  | Useful Lives |       |                  | December 31, |   |         | December 31, | 
|                              |  | (years)      |       |                  | 2005         |   |         | 2004         | 
|                              |  |              |       |                  |              |   |         |              | 
|                              |  |              |       | ($ in thousands) |             
|Land                          |  |              |      |                  |              | $ | 73,254  |              |  | $ | 77,554  |  
|Buildings and improvements    |  |              | 10-40 |                  |              |   | 440,973 |              |  |   | 449,105 |  
|Property and equipment        |  |              | 3-10  |                  |              |   | 116,259 |              |  |   | 77,419  |  
|China, glass and silverware   |  |              |       |                  |              |   | 2,144   |              |  |   | 1,755   |  
|                              |  |              |       |                  |              |   |         |              | 
|                              |  |              |       |                  |              |   | 632,630 |              |  |   | 605,833 |  
|Less accumulated depreciation |  |              |       |                  |              |   | (80,901 | )            |  |   | (56,667 | )
|Construction in progress      |  |              |       |                  |              |   | 55,133  |              |  |   | 21,960  |  
|                              |  |              |       |                  |              |   |         |              | 
|                              |  |              |       |                  |              | $ | 606,862 |              |  | $ | 571,126 |  
|                              |  |              |       |                  |              |   |         |              | 







F-23



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |    |                                                                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $1.5 million on the Holiday Inn Lawrence, KS hotel due to a
    reduced fair value appraisal;                                                                                                                                                                           
|
| | b) | $1.0 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;                                              
|
| | c) | $0.9 million on the Holiday Inn Hamburg, NY hotel 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;              
|
| | d) | $1.7 million on the Holiday Inn Sheffield, AL as this hotel
    was identified for sale in January 2006 and the estimated
    selling price was less than the assets carrying value;                                                                                   
|
| | e) | $1.8 million on the Fairfield Inn Valdosta, GA as this
    hotel was identified for sale in January 2006 and the estimated
    selling price was less than the assets carrying
    value; and                                                                          
|
| | f) | $1.0 million on the Fairfield Inn Merrimack, NH hotel 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 value
    to its fair value.





| |    |                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $3.8 million on the Park Inn Brunswick, GA hotel, which was
    converted from a Holiday Inn, as this hotel lost the business of
    a significant military group contract and the conversion of this
    hotel to a Park Inn was not expected to improve operating
    results; and      
|
| | b) | $0.6 million on the Holiday Inn Lawrence, KS hotel as the
    financial performance of this hotel continued to decline as it
    was in need of a major renovation which was not economically
    justifiable as management was notified the franchise agreement
    would not be renewed.





| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $4.5 million on the Crown Plaza Macon, GA as the expected
    holding period for this hotel was reduced to six months because
    the Company was unable to locate a lender to refinance the
    maturing mortgage on this hotel as a single asset loan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | b) | $1.5 million on the Crowne Plaza Cedar Rapids, IA as the
    primary revenue source at this hotel has historically been group
    room revenues which have declined considerably in the past two
    years due to the poor condition of a city-owned ballroom
    attached to this hotel; and                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | c) | $1.3 million on the Holiday Inn Winter Haven, FL as this
    hotel had been identified for sale in the second quarter of 2003
    and the estimated sales price, less costs to sell, was below the
    hotels carrying value. The estimated sales price of the
    hotel was negatively impacted by the unanticipated closure of a
    nearby tourist attraction and the unexpected announcement that a
    major baseball team was going to relocate their spring training
    facilities away from this property. In the fourth quarter of
    2003, the Company ceased its selling efforts with respect to
    this hotel because the allocated loan amount on this hotel
    significantly exceeded the fair value of the hotel.

F-24



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |             
|-- | ------------
|7. | Other Assets



|                                    |  |                   |       |  |                   |   |       | 
|----------------------------------- |  | ----------------- | ----- |  | ----------------- | - | ----- | 
|                                    |  | December 31, 2005 |       |  | December 31, 2004 |  
|                                    |  |                   |       |  |                   |  
|                                    |  | ($ in thousands)  |      
|Deferred financing costs            |  | $                 | 4,258 |  |                   | $ | 4,250 | 
|Deferred franchise fees             |  |                   | 2,001 |  |                   |   | 2,821 | 
|Utility and other deposits          |  |                   | 495   |  |                   |   | 704   | 
|Linen inventory (long-term portion) |  |                   | 837   |  |                   |   | 781   | 
|                                    |  |                   |       |  |                   |  
|                                    |  | $                 | 7,591 |  |                   | $ | 8,556 | 
|                                    |  |                   |       |  |                   |  





|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |     |            |  |   |     |  |  |   |     | 
|------------------------ |  | ---------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | ---- | - | --- | ---------- |  | - | --- |  |  | - | --- | 
|                         |  | Total            |       |  | 2006 |   |       | 2007 |  |   | 2008  |  |  | 2009 |       |  | 2010 |   |     | After 2010 | 
|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |     |            | 
|                         |  | ($ in thousands) |      
|Deferred financing costs |  | $                | 4,258 |  |      | $ | 1,360 |      |  | $ | 1,337 |  |  | $    | 1,055 |  |      | $ | 468 |            |  | $ | 38  |  |  |   |     | 
|Deferred franchise fees  |  |                  | 2,001 |  |      |   | 353   |      |  |   | 283   |  |  |      | 199   |  |      |   | 180 |            |  |   | 156 |  |  |   | 830 | 
|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |     |            | 
|                         |  | $                | 6,259 |  |      | $ | 1,713 |      |  | $ | 1,620 |  |  | $    | 1,254 |  |      | $ | 648 |            |  | $ | 194 |  |  | $ | 830 | 
|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |     |            | 



|   |                          
|-- | -------------------------
|8. | Other Accrued Liabilities



|                                 |  |                   |        |  |                   |   |        | 
|-------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | 
|                                 |  | December 31, 2005 |        |  | December 31, 2004 |  
|                                 |  |                   |        |  |                   |  
|                                 |  | ($ in thousands)  |       
|Salaries and related costs       |  | $                 | 6,358  |  |                   | $ | 5,754  | 
|Self-insurance loss accruals     |  |                   | 12,436 |  |                   |   | 11,357 | 
|Property and sales taxes         |  |                   | 7,192  |  |                   |   | 7,399  | 
|Professional fees                |  |                   | 883    |  |                   |   | 1,056  | 
|Provision for state income taxes |  |                   |       |  |                   |   | 207    | 
|Franchise fee accrual            |  |                   | 1,004  |  |                   |   | 1,050  | 
|Accrued interest                 |  |                   | 2,631  |  |                   |   | 2,035  | 
|Accrual for allowed claims       |  |                   |       |  |                   |   | 2,152  | 
|Other                            |  |                   | 1,024  |  |                   |   | 775    | 
|                                 |  |                   |        |  |                   |  
|                                 |  | $                 | 31,528 |  |                   | $ | 31,785 | 
|                                 |  |                   |        |  |                   |  

F-25



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                      
|-- | ---------------------
|9. | Long-Term Liabilities



|                                                                           |  |                  |         |   |              |   |         |  
|-------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------ | - | ------- | -
|                                                                           |  | December 31,     |         |   | December 31, |  
|                                                                           |  | 2005             |         |   | 2004         |  
|                                                                           |  |                  |         |   |              |  
|                                                                           |  | ($ in thousands) |        
|Refinancing Debt                                                           |  |                  |         |   |              |   |         |  
|Merrill Lynch Mortgage Lending, Inc.  Floating                            |  | $                | 67,546  |   |              | $ | 102,617 |  
|Merrill Lynch Mortgage Lending, Inc.  Fixed                               |  |                  | 252,377 |   |              |   | 258,410 |  
|                                                                           |  |                  |         |   |              |  
|Merrill Lynch Mortgage Lending, Inc.  Total                               |  |                  | 319,923 |   |              |   | 361,027 |  
|Other Financings                                                           |  |                  |         |   |              |   |         |  
|Computer Share Trust Company of Canada                                     |  |                  | 7,838   |   |              |   | 7,843   |  
|Column Financial, Inc.                                                     |  |                  | 10,337  |   |              |   | 25,058  |  
|Lehman Brothers Holdings, Inc.                                             |  |                  | 22,398  |   |              |   | 22,927  |  
|JP Morgan Chase Bank, Trustee                                              |  |                  | 10,064  |   |              |   | 10,110  |  
|DDL Kinser                                                                 |  |                  |        |   |              |   | 2,286   |  
|Wachovia                                                                   |  |                  | 13,173  |   |              |   |        |  
|IXIS Real Estate Capital, Inc.                                             |  |                  | 19,000  |   |              |   |        |  
|Column Financial, Inc.                                                     |  |                  | 8,146   |   |              |   | 8,545   |  
|Column Financial, Inc.                                                     |  |                  |        |   |              |   | 3,069   |  
|                                                                           |  |                  |         |   |              |  
|Total  Other Financings                                                   |  |                  | 90,956  |   |              |   | 79,838  |  
|                                                                           |  |                  |         |   |              |  
|Long-term liabilities  other                                              |  |                  |         |   |              |   |         |  
|Tax notes issued pursuant to Lodgians Joint Plan of
    Reorganization    |  |                  | 2,220   |   |              |   | 3,302   |  
|Other long-term liabilities                                                |  |                  | 1,151   |   |              |   | 1,865   |  
|                                                                           |  |                  |         |   |              |  
|                                                                           |  |                  | 3,371   |   |              |   | 5,167   |  
|                                                                           |  |                  |         |   |              |  
|                                                                           |  |                  | 414,250 |   |              |   | 446,032 |  
|Long-term liabilities related to assets held for sale                      |  |                  | (1,287  | ) |              |   | (27,599 | )
|                                                                           |  |                  |         |   |              |  
|                                                                           |  |                  | 412,963 |   |              |   | 418,433 |  
|                                                                           |  |                  |         |   |              |  
|Less: Current portion of long-term liabilities 
    continuing operations |  |                  | (18,531 | ) |              |   | (25,290 | )
|                                                                           |  |                  |         |   |              |  
|Total long-term liabilities  continuing operations                        |  | $                | 394,432 |   |              | $ | 393,143 |  
|                                                                           |  |                  |         |   |              |  



| |                                          
| | -----------------------------------------
| | Merrill Lynch Mortgage Lending, Inc. Debt



F-26



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










| |   |                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Extension of the initial maturity from June 30, 2006 to
    January 11, 2007. The Company still maintains the option,
    subject to certain conditions, to extend the loan for up to
    three years from the new initial maturity date in January 2007;                                                                                                                         
|
| |  | Three additional properties in the floating rate pool are now
    classified as sale properties. Once classified as a
    sale property the Company will be able to be release
    the hotel from the collateral pool by payment of the greater of
    (a) 100% of the aggregate allocated loan amount (lowered
    from 125%) and (b) the net sales proceeds of the property;
|
| |  | The prepayment penalty dropped to 1% in July 2005 and has been
    further reduced for the three additional sale properties after
    July 2005 to 0.5%; and                                                                                                                                                                                                                      
|
| |  | Certain required capital and environmental repairs under the
    original Floating Rate Loan have been determined not to be
    necessary and have been removed as requirements under the loan.                                                                                                                                                                                   

1 2


12-month


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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


12-month






1 2








| |   |                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                  
|
| |  | with regard to the Floating Rate Debt, either the termination of
    franchise agreements for more than two properties or the
    termination of franchise agreements for hotels whose allocated
    loan amounts represent more than 5% of the outstanding principal
    amount of the Floating Rate Debt, and such hotels

F-28



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | continue to operate for more than five consecutive days without
    being subject to replacement franchise agreements;                                                                                                                                                                                                                                                                                                                           
|
| |  | with regard to the Fixed Rate 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.                                                                                                                                                                                                                                                                                    





| |                      
| | ---------------------
| | Column Financial Debt





| |                          
| | -------------------------
| | JP Morgan Chase Bank Debt



deed-in


F-29



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                                                          
| | ---------------------------------------------------------
| | IXIS Real Estate Capital, Inc. and Wachovia Bank
    Debt

30-day








| |                     
| | --------------------
| | Franchise Agreements





F-30



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                             
| | ----------------------------
| | Interest Rate Cap Agreements

1 2












| |                     
| | --------------------
| | Collateral for Loans



|                                                |  |                  |    |                   |  |                 |         |                |  |   |         |  |  |                 
|----------------------------------------------- |  | ---------------- | -- | ----------------- |  | --------------- | ------- | -------------- |  | - | ------- |  |  | ----------------
|                                                |  |                  |    | December 31, 2005 |  |                
|                                                |  |                  |    |                   |  |                
|                                                |  |                  |    | Property and      |  |                 |         |               
|                                                |  | Number           |    | Equipment,        |  | Long-term       |         |               
|                                                |  | of Hotels        |    | Net (1)           |  | Obligations (1) |         | Interest Rates
|                                                |  |                  |    |                   |  |                 |         |               
|                                                |  | ($ in thousands) |    |                  
|Refinancing Debt                                |  |                  |    |                   |  |                 |         |                |  |   |         |  |  |                 
|Merrill Lynch Mortgage Lending, Inc.  Floating |  |                  | 19 |                   |  | $               | 93,977  |                |  | $ | 67,546  |  |  | LIBOR plus 3.40%
|Merrill Lynch Mortgage Lending, Inc.  Fixed    |  |                  | 34 |                   |  |                 | 333,825 |                |  |   | 252,377 |  |  | 6.58%           
|                                                |  |                  |    |                   |  |                 |         |                |  |   |         |  |  |                 
|Merrill Lynch Mortgage Lending, Inc.  Total    |  |                  | 53 |                   |  |                 | 427,802 |                |  |   | 319,923 |  |  |                 

F-31



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|------------------------------------------------------------- |  | ---------------- | -- | ----------------- |  | --------------- | ------- | -------------- |  | - | ------- | - |  | ---------------------------------
|                                                              |  |                  |    | December 31, 2005 |  |                
|                                                              |  |                  |    |                   |  |                
|                                                              |  |                  |    | Property and      |  |                 |         |               
|                                                              |  | Number           |    | Equipment,        |  | Long-term       |         |               
|                                                              |  | of Hotels        |    | Net (1)           |  | Obligations (1) |         | Interest Rates
|                                                              |  |                  |    |                   |  |                 |         |               
|                                                              |  | ($ in thousands) |    |                  
|Other Financings                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|Computer Share Trust Company of Canada                        |  |                  | 1  |                   |  |                 | 16,260  |                |  |   | 7,838   |   |  | 7.88%                            
|Column Financial, Inc.                                        |  |                  | 7  |                   |  |                 | 51,603  |                |  |   | 10,337  |   |  | 10.59%                           
|Lehman Brothers Holdings, Inc.                                |  |                  | 5  |                   |  |                 | 58,161  |                |  |   | 22,398  |   |  | $15,777 at 9.40%; $6,621 at 8.90%
|JP Morgan Chase Bank                                          |  |                  | 2  |                   |  |                 | 6,019   |                |  |   | 10,064  |   |  | 8.00%                            
|Wachovia                                                      |  |                  | 2  |                   |  |                 | 13,525  |                |  |   | 13,173  |   |  | $10,000 at 6.03%; $3,173 at 5.78%
|IXIS Real Estate Capital, Inc.                                |  |                  | 1  |                   |  |                 | 15,378  |                |  |   | 19,000  |   |  | LIBOR plus 2.90%                 
|Column Financial, Inc.                                        |  |                  | 1  |                   |  |                 | 11,357  |                |  |   | 8,146   |   |  | 9.45%                            
|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|Total  other financing                                       |  |                  | 19 |                   |  |                 | 172,303 |                |  |   | 90,956  |   |  |                                  
|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|                                                              |  |                  | 72 |                   |  |                 | 600,105 |                |  |   | 410,879 |   |  | 7.15%(3)                         
|Long-term liabilities  other                                 |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|Tax notes issued pursuant to our Joint Plan of Reorganization |  |                  |   |                   |  |                 |        |                |  |   | 2,220   |   |  |                                  
|Other                                                         |  |                  |   |                   |  |                 |        |                |  |   | 1,151   |   |  |                                  
|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|                                                              |  |                  |   |                   |  |                 |        |                |  |   | 3,371   |   |  |                                  
|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|Property and equipment  other                                |  |                  | 5  |                   |  |                 | 20,554  |                |  |   |        |   |  |                                  
|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|                                                              |  |                  | 77 |                   |  |                 | 620,659 |                |  |   | 414,250 |   |  |                                  
|Held for sale                                                 |  |                  | (3 | )                 |  |                 | (13,797 | )              |  |   | (1,287  | ) |  |                                  
|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  
|Total December 31, 2005(2)                                    |  |                  | 74 |                   |  | $               | 606,862 |                |  | $ | 412,963 |   |  |                                  
|                                                              |  |                  |    |                   |  |                 |         |                |  |   |         |   |  |                                  






|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Debt obligations and property and equipment of one hotel in
    which we have a non-controlling equity interest that we do not
    consolidate are excluded from the table.
|   
|(2) | Debt obligations at December 31, 2005 include the current
    portion.                                                                                                     
|   
|(3) | The 7.15% in the table represents our weighted average interest
    rate on mortgage debt at December 31, 2005, using the
    December 30, 2005 LIBOR of 4.39%.            



F-32



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |                                  
| | ---------------------------------
| | Future Loan Repayment Projections



|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      |  |   |        |  |  |   |       | 
|----------------------------------------------------------------- |  | ---------------- | ------- | - | ---------- | - | ------ | ---- |  | - | ------- |  |  | ---- | ------ |  | ---- | - | ------- | ---- |  | - | ------ |  |  | - | ----- | 
|                                                                  |  | Debt             |         |   | Maturities |  
|                                                                  |  | Obligations      |         |   |            |  
|                                                                  |  | December 31,     |         |   |            |   | After  |     
|                                                                  |  | 2005             |         |   | 2006       |   |        | 2007 |  |   | 2008    |  |  | 2009 |        |  | 2010 |   |         | 2010 | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 
|                                                                  |  | ($ in thousands) |        
|Refinancing Debt:                                                 |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      |  |   |        |  |  |   |       | 
|Merrill Lynch Mortgage Lending, Inc.  Floating                   |  | $                | 67,546  |   |            | $ | 755    |      |  | $ | 66,791  |  |  | $    |       |  |      | $ |        |      |  | $ |       |  |  | $ |      | 
|Merrill Lynch Mortgage Lending, Inc.  Fixed                      |  |                  | 252,377 |   |            |   | 4,318  |      |  |   | 4,615   |  |  |      | 4,886  |  |      |   | 238,558 |      |  |   |       |  |  |   |      | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 
|Merrill Lynch Mortgage Lending, Inc.  Total                      |  |                  | 319,923 |   |            |   | 5,073  |      |  |   | 71,406  |  |  |      | 4,886  |  |      |   | 238,558 |      |  |   |       |  |  |   |      | 
|Other Financings:                                                 |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      |  |   |        |  |  |   |       | 
|Computer Share Trust Company of Canada                            |  |                  | 7,838   |   |            |   | 288    |      |  |   | 7,550   |  |  |      |       |  |      |   |        |      |  |   |       |  |  |   |      | 
|Column Financial, Inc.                                            |  |                  | 10,337  |   |            |   | 706    |      |  |   | 784     |  |  |      | 871    |  |      |   | 968     |      |  |   | 7,008  |  |  |   |      | 
|Lehman Brothers Holdings, Inc.                                    |  |                  | 22,398  |   |            |   | 580    |      |  |   | 21,818  |  |  |      |       |  |      |   |        |      |  |   |       |  |  |   |      | 
|JP Morgan Chase Bank, Trustee                                     |  |                  | 10,064  |   |            |   | 10,064 |      |  |   |        |  |  |      |       |  |      |   |        |      |  |   |       |  |  |   |      | 
|Wachovia                                                          |  |                  | 13,173  |   |            |   | 213    |      |  |   | 240     |  |  |      | 253    |  |      |   | 271     |      |  |   | 3,135  |  |  |   | 9,061 | 
|IXIS Real Estate Capital, Inc.                                    |  |                  | 19,000  |   |            |   |       |      |  |   | 214     |  |  |      | 18,786 |  |      |   |        |      |  |   |       |  |  |   |      | 
|Column Financial, Inc.                                            |  |                  | 8,146   |   |            |   | 477    |      |  |   | 524     |  |  |      | 575    |  |      |   | 632     |      |  |   | 5,938  |  |  |   |      | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 
|Total  Other Financings                                          |  |                  | 90,956  |   |            |   | 12,328 |      |  |   | 31,130  |  |  |      | 20,485 |  |      |   | 1,871   |      |  |   | 16,081 |  |  |   | 9,061 | 
|Other long-term liabilities:                                      |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      |  |   |        |  |  |   |       | 
|Tax notes issued pursuant to our Joint Plan of
    Reorganization |  |                  | 2,220   |   |            |   | 971    |      |  |   | 620     |  |  |      | 597    |  |      |   | 32      |      |  |   |       |  |  |   |      | 
|Other long-term liabilities                                       |  |                  | 1,151   |   |            |   | 182    |      |  |   | 544     |  |  |      | 165    |  |      |   | 165     |      |  |   | 82     |  |  |   | 13    | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 
|                                                                  |  |                  | 3,371   |   |            |   | 1,153  |      |  |   | 1,164   |  |  |      | 762    |  |      |   | 197     |      |  |   | 82     |  |  |   | 13    | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 
|Total debt obligations                                            |  |                  | 414,250 |   |            |   | 18,554 |      |  |   | 103,700 |  |  |      | 26,133 |  |      |   | 240,626 |      |  |   | 16,163 |  |  |   | 9,074 | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 
|Less: Debt obligations  discontinued                             |  |                  | (1,287  | ) |            |   | (23    | )    |  |   |         |  |  |      |        |  |      |   |         |      |  |   |        |  |  |   |       | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 
|Total Debt obligations  continued                                |  | $                | 412,963 |   |            | $ | 18,531 |      |  |   |         |  |  |      |        |  |      |   |         |      |  |   |        |  |  |   |       | 
|                                                                  |  |                  |         |   |            |   |        |      |  |   |         |  |  |      |        |  |      |   |         |      | 

10.     12.25% Cumulative Preferred
Shares Subject to Mandatory Redemption






F-33



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|    |                     
|--- | --------------------
|11. | Stockholders Equity



| |                         
| | ------------------------
| | 2004 Reverse Stock Split







| |                            
| | ---------------------------
| | 2004 Public Equity Offering







F-34



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |               
| | --------------
| | Treasury Stock





| |                                  
| | ---------------------------------
| | 2002 Joint Plan of Reorganization









|    |             
|--- | ------------
|12. | Income Taxes



|                              |  |                  |     |  |          |   |       |       |  |   |         |  |  |          |     |       |  |   |   |  |  |   |     | 
|----------------------------- |  | ---------------- | --- |  | -------- | - | ----- | ----- |  | - | ------- |  |  | -------- | --- | ----- |  | - | - |  |  | - | --- | 
|                              |  | 2005             |     |  | 2004     |  
|                              |  |                  |     |  |          |  
|                              |  | Current          |     |  | Deferred |   |       | Total |  |   | Current |  |  | Deferred |     | Total | 
|                              |  |                  |     |  |          |   |       |       |  |   |         |  |  |          |     |       | 
|                              |  | ($ in thousands) |    
|Federal                       |  | $                |    |  |          | $ | 7,057 |       |  | $ | 7,057   |  |  | $        |    |       |  | $ |  |  |  | $ |    | 
|State and local               |  |                  | 362 |  |          |   | 635   |       |  |   | 997     |  |  |          | 62  |       |  |   |  |  |  |   | 62  | 
|Foreign                       |  |                  | 162 |  |          |   |      |       |  |   | 162     |  |  |          | 166 |       |  |   |  |  |  |   | 166 | 
|                              |  |                  |     |  |          |   |       |       |  |   |         |  |  |          |     |       |  |  
|                              |  |                  | 524 |  |          |   | 7,692 |       |  |   | 8,216   |  |  |          | 228 |       |  |   |  |  |  |   | 228 | 
|Less: Discontinued operations |  |                  |    |  |          |   | 1,235 |       |  |   | 1,235   |  |  |          |    |       |  |   |  |  |  |   |    | 
|                              |  |                  |     |  |          |   |       |       |  |   |         |  |  |          |     |       |  |  
|                              |  | $                | 524 |  |          | $ | 6,457 |       |  | $ | 6,981   |  |  | $        | 228 |       |  | $ |  |  |  | $ | 228 | 
|                              |  |                  |     |  |          |   |       |       |  |   |         |  |  |          |     |       |  |  

F-35



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                          |                          |                  |         |          |                  |   |       |             |   |   |         |          |   |         |         |          |             |   |       |        |   |   |         |          |  
|----------------------------------------- | ------------------------ | ---------------- | ------- | -------- | ---------------- | - | ----- | ----------- | - | - | ------- | -------- | - | ------- | ------- | -------- | ----------- | - | ----- | ------ | - | - | ------- | -------- | -
|                                          |                          | 2005             |         |          | 2004             |  
|                                          |                          |                  |         |          |                  |  
|                                          |                          | Total            |         |          | Current          |   |       | Non-current |   |   | Total   |          |   | Current |         |          | Non-current |  
|                                          |                          |                  |         |          |                  |   |       |             |   |   |         |          |   |         |         |          |             |  
|                                          |                          | ($ in thousands) |         |          | ($ in thousands) |  
|Property and equipment                    |                          | $                | (12,703 | )        |                  | $ |      |             |   | $ | (12,703 | )        |   | $       | 4,951   |          |             | $ |      |        |   | $ | 4,951   |         
|Net operating loss carryforwards (NOLs) |                          |                  | 122,220 |          |                  |   |      |             |   |   | 122,220 |          |   |         | 127,547 |          |             |   |      |        |   |   | 127,547 |         
|Loan costs                                |                          |                  | 567     |          |                  |   |      |             |   |   | 567     |          |   |         | 782     |          |             |   |      |        |   |   | 782     |         
|Legal and workers compensation reserves  |                          |                  | 4,048   |          |                  |   | 4,048 |             |   |   |        |          |   |         | 3,609   |          |             |   | 3,609 |        |   |   |        |         
|AMT and FICA credit carryforwards         |                          |                  | 2,360   |          |                  |   |      |             |   |   | 2,360   |          |   |         | 2,341   |          |             |   |      |        |   |   | 2,341   |         
|Other operating accruals                  |                          |                  | 2,158   |          |                  |   | 2,158 |             |   |   |        |          |   |         | 937     |          |             |   | 937   |        |   |   |        |         
|Other                                     |                          |                  | (450    | )        |                  |   |      |             |   |   | (450    | )        |   |         | 4,988   |          |             |   |      |        |   |   | 4,988   |         
|                                          |                          |                  |         |          |                  |   |       |             |   |   |         |          |   |         |         |          |             |  
|                                          | Total                    |                  |         | 118,200  |                  |   |       | 6,206       |   |   |         | 111,994  |   |         |         | 145,155  |             |   |       | 4,546  |   |   |         | 140,609  |  
|                                          | Less valuation allowance |                  |         | (118,200 | )                |   |       | (6,206      | ) |   |         | (111,994 | ) |         |         | (145,155 | )           |   |       | (4,546 | ) |   |         | (140,609 | )
|                                          |                          |                  |         |          |                  |   |       |             |   |   |         |          |   |         |         |          |             |  
|                                          |                          | $                |        |          |                  | $ |      |             |   | $ |        |          |   | $       |        |          |             | $ |      |        |   | $ |        |         
|                                          |                          |                  |         |          |                  |   |       |             |   |   |         |          |   |         |         |          |             |  



|                                                              |  |                  |       |  |      |   |         |  
|------------------------------------------------------------- |  | ---------------- | ----- |  | ---- | - | ------- | -
|                                                              |  | 2005             |       |  | 2004 |  
|                                                              |  |                  |       |  |      |  
|                                                              |  | ($ in thousands) |      
|Federal income tax (benefit) charge at statutory federal rate |  | $                | 6,974 |  |      | $ | (10,746 | )
|State income tax (benefit) charge, net                        |  |                  | 985   |  |      |   | (1,517  | )
|Non-deductible items                                          |  |                  | 95    |  |      |   | 7,338   |  
|Other                                                         |  |                  | 162   |  |      |   |        |  
|Change in valuation allowance                                 |  |                  | 0     |  |      |   | 5,153   |  
|                                                              |  |                  |       |  |      |  
|                                                              |  |                  | 8,216 |  |      |   | 228     |  
|Less discontinued operations                                  |  |                  | 1,235 |  |      |   |        |  
|                                                              |  |                  |       |  |      |  
|Provision (benefit) for income taxes                          |  | $                | 6,981 |  |      | $ | 228     |  
|                                                              |  |                  |       |  |      |  

90-7,




F-36



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|    |                           
|--- | --------------------------
|13. | Related Party Transactions



| |                         
| | ------------------------
| | Preferred Share Exchange





| |                                          
| | -----------------------------------------
| | Merrill Lynch Mortgage Lending, Inc. Debt





| |            
| | -----------
| | Consultancy





| |                         
| | ------------------------
| | Related Party Receivable



F-37



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                   
|--- | ------------------
|14. | Earnings Per Share



|                                          |                                                                          |                                         |   |        |      |  |   |         |   |  |   |         |  
|----------------------------------------- | ------------------------------------------------------------------------ | --------------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                          |                                                                          | 2005                                    |   |        | 2004 |  |   | 2003    |  
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          |                                                                          | ($ in thousands, except per share data) |  
|Basic and diluted earnings per share:     |                                                                          |                                         |   |        |      |  |   |         |   |  |   |        
|Numerator:                                |                                                                          |                                         |   |        |      |  |   |         |   |  |   |        
|                                          | Income (loss) from continuing operations                                 |                                         | $ | 10,449 |      |  | $ | (31,537 | ) |  | $ | (21,765 | )
|                                          | Income from discontinued operations                                      |                                         |   | 1,852  |      |  |   | (297    | ) |  |   | (9,912  | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          | Net income (loss)                                                        |                                         |   | 12,301 |      |  |   | (31,834 | ) |  |   | (31,677 | )
|                                          | Preferred stock dividend                                                 |                                         |   |       |      |  |   |        |   |  |   | (7,594  | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          | Net income (loss) attributable to common stock                           |                                         | $ | 12,301 |      |  | $ | (31,834 | ) |  | $ | (39,271 | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|Denominator:                              |                                                                          |                                         |   |        |      |  |   |         |   |  |   |        
|                                          | Denominator for basic earnings per share  weighted
    average shares   |                                         |   | 24,576 |      |  |   | 13,817  |   |  |   | 2,333   |  
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          | Denominator for diluted earnings per share  weighted
    average shares |                                         |   | 24,630 |      |  |   | 13,817  |   |  |   | 2,333   |  
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|Basic earnings (loss) per common share:   |                                                                          |                                         |   |        |      |  |   |         |   |  |   |        
|                                          | Income (loss) from continuing operations                                 |                                         | $ | 0.42   |      |  | $ | (2.28   | ) |  | $ | (9.33   | )
|                                          | Income from discontinued operations                                      |                                         |   | 0.08   |      |  |   | (0.02   | ) |  |   | (4.25   | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          | Net income (loss)                                                        |                                         |   | 0.50   |      |  |   | (2.30   | ) |  |   | (13.58  | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          | Net income (loss) attributable to common stock                           |                                         | $ | 0.50   |      |  | $ | (2.30   | ) |  | $ | (16.83  | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|Diluted earnings (loss) per common share: |                                                                          |                                         |   |        |      |  |   |         |   |  |   |        
|                                          | Income (loss) from continuing operations                                 |                                         | $ | 0.42   |      |  | $ | (2.28   | ) |  | $ | (9.33   | )
|                                          | Income from discontinued operations                                      |                                         |   | 0.08   |      |  |   | (0.02   | ) |  |   | (4.25   | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          | Net income (loss)                                                        |                                         |   | 0.50   |      |  |   | (2.30   | ) |  |   | (13.58  | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  
|                                          | Net income (loss) attributable to common stock                           |                                         | $ | 0.50   |      |  | $ | (2.30   | ) |  | $ | (16.83  | )
|                                          |                                                                          |                                         |   |        |      |  |   |         |  







F-38



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                              
|--- | -----------------------------
|15. | Commitments and Contingencies



| |                                             
| | --------------------------------------------
| | Franchise Agreements and Capital Expenditure



|                        |  |                  |        |  |      |   |        |      |  |   |        | 
|----------------------- |  | ---------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                        |  | 2005             |        |  | 2004 |   |        | 2003 | 
|                        |  |                  |        |  |      |   |        |      | 
|                        |  | ($ in thousands) |       
|Continuing operations   |  | $                | 22,158 |  |      | $ | 21,225 |      |  | $ | 19,831 | 
|Discontinued operations |  |                  | 1,486  |  |      |   | 3,136  |      |  |   | 4,554  | 
|                        |  |                  |        |  |      |   |        |      | 
|                        |  | $                | 23,644 |  |      | $ | 24,361 |      |  | $ | 24,385 | 
|                        |  |                  |        |  |      |   |        |      | 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Six hotels are held for sale. Two of these hotels are in default
    of their respective franchise agreement for failure to complete
    their Property Improvement Plan (PIP). Four
    additional hotels are in default or in non-compliance of their
    respective franchise agreements for not maintaining required
    guest satisfaction scores. Each of these hotels requires a
    significant capital investment for which the Company does not
    anticipate a sufficient return on its investment. The Company
    has entered into a forbearance agreement with the franchisor
    regarding one of these hotels that is in default which will
    maintain the flag until the earlier of March 31, 2006 or
    until the Company sells the hotel. The Company plans to enter
    into a voluntary termination agreement with the franchisor
    regarding two of these hotels which will maintain the flag until
    the earlier of June 30, 2006 or until the Company sells the
    hotels.
|
| |  | One hotel was held for sale but was reclassified into continuing
    operations in the fourth quarter 2005 as management no longer
    expected to have the hotel sold within one year due to issues
    related to the transfer of the ground lease to a prospective
    buyer. This hotel is in default of its franchise agreement for
    not maintaining required guest satisfaction scores and has a
    license termination date of February 14, 2006. The Company
    may be subject to liquidated damages. The Company has entered
    into a letter of intent to sell this hotel to a joint venture in
    which the Company will be a minority owner. However, the Company
    will no longer continue to operate the hotel.                                                                                                                                                                                                                                                                       
|
| |  | One hotel has received an extension to its default termination
    date until August 15, 2006. The franchisor has verbally
    agreed to the Companys planned renovations of two floors
    of guestrooms and guestroom corridors. This work began on
    January 9, 2006 and will take approximately 90 days to
    complete. The Company anticipates that the renovations will
    assist in improving the quest product scores.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Seven hotels are in default or non-compliance of their
    respective franchise agreement because of substandard guest
    satisfaction or quality scores. Three of these hotels are
    trending above the required thresholds, however, they must
    remain above that threshold for two consecutive years to earn a
    clean                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-39



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | slate letter. The Company anticipates these three hotels
    will earn their clean slate letters in August 2006,
    August 2007 and February 2008, respectively. Two of these hotels
    are awaiting follow-up
    quality inspections by the franchisor to cure the non-compliance
    issues. Two of these hotels have entered into the non-compliance
    status due to a new measurement process implemented in January
    2006 by the franchisor. One of these hotels in non- compliance
    recently received an up-branding renovation. The scores used to
    determine this non-compliance were done before the
    pre-renovation and the Company anticipates curing this
    non-compliance as the new scores begin to cycle in. The
    corporate operations team, as well as each propertys
    general manager and associates, have focused their efforts to
    cure these failures through enhanced service, increased
    cleanliness, and product improvements by the required cure date.
    If the Company does not achieve scores above required thresholds
    by the designated date, the hotel would be subject to default of
    its franchise agreement. Each hotel would receive another
    opportunity to improve its score before the hotel would be at
    the risk of having its franchise agreement terminated.









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                                                                                                                                                                                            
|
| |  | with regards to the Merrill Lynch Mortgage floating rate
    refinancing debt (Floating Rate Debt), either the
    termination of franchise agreements for more than two properties
    or the termination of franchise agreements for hotels whose
    allocated loan amounts represent more than 5% of the outstanding
    principal amount of the floating rate debt, and such hotels
    continue to operate for more than five consecutive days without
    being subject to replacement franchise agreements;

F-40



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | with regards to the Merrill Lynch Mortgage fixed rate
    refinancing debt (Fixed Rate 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







| |                
| | ---------------
| | Casualty Losses



F-41



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








ramp-up true-up








F-42



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |           
| | ----------
| | Litigation





| |                 
| | ----------------
| | Operating Leases



|                        |  |                  |       |  |      |   |       |      |  |   |       | 
|----------------------- |  | ---------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                        |  | 2005             |       |  | 2004 |   |       | 2003 | 
|                        |  |                  |       |  |      |   |       |      | 
|                        |  | ($ in thousands) |      
|Continuing operations   |  | $                | 3,368 |  |      | $ | 2,641 |      |  | $ | 4,698 | 
|Discontinued operations |  |                  |      |  |      |   |      |      |  |   |      | 
|                        |  |                  |       |  |      |   |       |      | 
|Total operations        |  | $                | 3,368 |  |      | $ | 2,641 |      |  | $ | 4,698 | 
|                        |  |                  |       |  |      |   |       |      | 



|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2006                |  | $ | 3,214   | 
|2007                |  |   | 3,235   | 
|2008                |  |   | 3,307   | 
|2009                |  |   | 3,342   | 
|2010                |  |   | 3,429   | 
|2011 and thereafter |  |   | 100,058 | 
|                    |  |   |        
|                    |  | $ | 116,585 | 
|                    |  |   |        



|    |                          
|--- | -------------------------
|16. | Employee Retirement Plans



F-43



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                        |  |                  |     |  |      |   |     |      |  |   |     | 
|----------------------- |  | ---------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                        |  | 2005             |     |  | 2004 |   |     | 2003 | 
|                        |  |                  |     |  |      |   |     |      | 
|                        |  | ($ in thousands) |    
|Continuing operations   |  | $                | 178 |  |      | $ | 203 |      |  | $ | 260 | 
|Discontinued operations |  |                  | 0   |  |      |   | 0   |      |  |   | 0   | 
|                        |  |                  |     |  |      |   |     |      | 
|                        |  | $                | 178 |  |      | $ | 203 |      |  | $ | 260 | 
|                        |  |                  |     |  |      |   |     |      | 



|                        |  |                  |     |  |      |   |     |      |  |   |     | 
|----------------------- |  | ---------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                        |  | 2005             |     |  | 2004 |   |     | 2003 | 
|                        |  |                  |     |  |      |   |     |      | 
|                        |  | ($ in thousands) |    
|Continuing operations   |  | $                | 706 |  |      | $ | 661 |      |  | $ | 582 | 
|Discontinued operations |  |                  | 40  |  |      |   | 75  |      |  |   | 95  | 
|                        |  |                  |     |  |      |   |     |      | 
|                        |  | $                | 746 |  |      | $ | 736 |      |  | $ | 677 | 
|                        |  |                  |     |  |      |   |     |      | 



|    |                  
|--- | -----------------
|17. | Subsequent Events



| |                                  
| | ---------------------------------
| | Additions to Held for Sale Hotels





| |                        
| | -----------------------
| | Wachovia Bank Refinance





| |                                   
| | ----------------------------------
| | IXIS Real Estate Capital Refinance



F-44



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                                 
| | --------------------------------
| | Fire at Holiday Inn Marietta, GA





|    |                                             
|--- | --------------------------------------------
|18. | Selected Quarterly Financial Data, Unaudited

10-Q


|                    |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |        |  |  |        |        |  |  |        |        | 
|------------------- | ----------------- | ---------------- | ------ | ------ | ------- |  | ------ | ------- |  |  | ------- | ------ |  | ------- | ------ | ------ | ------- |  | ------ | ------- |  |  | ------- | ------ |  |  | ------ | ------ |  |  | ------ | ------ | 
|                    |                   | 2005             |        |        | 2004    | 
|                    |                   |                  |        |        |         | 
|                    |                   | Fourth           |        |        | Third   |  |        | Second  |  |  | First   |        |  | Fourth  |        |        | Third   |  |        | Second  |  |  | First   |       
|                    |                   | Quarter          |        |        | Quarter |  |        | Quarter |  |  | Quarter |        |  | Quarter |        |        | Quarter |  |        | Quarter |  |  | Quarter |       
|                    |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |       
|                    |                   | ($ in thousands) |       
|Revenues:           |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |        |  |  |        |        |  |  |        |       
|                    | Rooms             |                  | $      | 56,989 |         |  | $      | 65,743  |  |  | $       | 64,416 |  |         | $      | 54,293 |         |  | $      | 50,254  |  |  | $       | 62,425 |  |  | $      | 62,675 |  |  | $      | 55,901 | 
|                    | Food and beverage |                  |        | 17,534 |         |  |        | 16,571  |  |  |         | 18,744 |  |         |        | 14,866 |         |  |        | 19,029  |  |  |         | 16,426 |  |  |        | 18,984 |  |  |        | 16,192 | 
|                    | Other             |                  |        | 2,306  |         |  |        | 2,584   |  |  |         | 2,701  |  |         |        | 2,517  |         |  |        | 2,303   |  |  |         | 2,734  |  |  |        | 2,775  |  |  |        | 2,727  | 
|                    |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |       
|                    |                   |                  | 76,829 |        |         |  | 84,898 |         |  |  | 85,861  |        |  |         | 71,676 |        |         |  | 71,586 |         |  |  | 81,585  |        |  |  | 84,434 |        |  |  | 74,820 |       
|                    |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |       
|Operating expenses: |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |        |  |  |        |        |  |  |        |       
|Direct:             |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |        |  |  |        |        |  |  |        |       
|                    | Rooms             |                  |        | 16,555 |         |  |        | 17,829  |  |  |         | 17,541 |  |         |        | 15,419 |         |  |        | 15,557  |  |  |         | 17,782 |  |  |        | 16,288 |  |  |        | 15,392 | 
|                    | Food and beverage |                  |        | 12,605 |         |  |        | 12,047  |  |  |         | 13,062 |  |         |        | 10,996 |         |  |        | 13,874  |  |  |         | 12,302 |  |  |        | 12,473 |  |  |        | 11,317 | 
|                    | Other             |                  |        | 1,955  |         |  |        | 2,012   |  |  |         | 2,129  |  |         |        | 1,954  |         |  |        | 1,851   |  |  |         | 2,038  |  |  |        | 2,055  |  |  |        | 1,963  | 
|                    |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |       
|                    |                   |                  | 31,115 |        |         |  | 31,888 |         |  |  | 32,732  |        |  |         | 28,369 |        |         |  | 31,282 |         |  |  | 32,122  |        |  |  | 30,816 |        |  |  | 28,672 |       
|                    |                   |                  |        |        |         |  |        |         |  |  |         |        |  |         |        |        |         |  |        |         |  |  |         |       
|                    |                   |                  | 45,714 |        |         |  | 53,010 |         |  |  | 53,129  |        |  |         | 43,307 |        |         |  | 40,304 |         |  |  | 49,463  |        |  |  | 53,618 |        |  |  | 46,148 |       

F-45



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |        |        |  
|---------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------- | ------ | ------- | ------- | - | ------ | ------- | ------ | - | ------- | ------ | ------ | ------- | ------ | ------ | ------- | - | ------- | ------- | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------- | - | ------ | ------ | ------ | -
|                                                                 |                                                                | 2005                               |        |         | 2004    |  
|                                                                 |                                                                |                                    |        |         |         |  
|                                                                 |                                                                | Fourth                             |        |         | Third   |   |        | Second  |        |   | First   |        |        | Fourth  |        |        | Third   |   |         | Second  |        |   | First   |       
|                                                                 |                                                                | Quarter                            |        |         | Quarter |   |        | Quarter |        |   | Quarter |        |        | Quarter |        |        | Quarter |   |         | Quarter |        |   | Quarter |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 |                                                                | ($ in thousands)                   |       
|Other operating expenses:                                        |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | Other hotel operating costs                                    |                                    |        | 25,281  |         |   |        | 26,696  |        |   |         | 24,655 |        |         |        | 23,788 |         |   |         | 22,686  |        |   |         | 24,399 |        |   |         | 22,890 |         |   |        | 23,141 |       
|                                                                 | Property and other taxes, insurance and leases                 |                                    |        | 4,971   |         |   |        | 5,908   |        |   |         | 5,814  |        |         |        | 5,676  |         |   |         | 5,042   |        |   |         | 5,431  |        |   |         | 5,165  |         |   |        | 5,609  |       
|                                                                 | Corporate and other                                            |                                    |        | 4,529   |         |   |        | 6,022   |        |   |         | 5,863  |        |         |        | 4,649  |         |   |         | 3,423   |        |   |         | 4,389  |        |   |         | 4,682  |         |   |        | 4,330  |       
|                                                                 | Casualty (gain) losses, net                                    |                                    |        | (31,251 | )       |   |        | 190     |        |   |         | 28     |        |         |        | 104    |         |   |         | 294     |        |   |         | 2,019  |        |   |         |       |         |   |        |       |       
|                                                                 | Depreciation and amortization                                  |                                    |        | 9,167   |         |   |        | 7,099   |        |   |         | 6,793  |        |         |        | 6,588  |         |   |         | 6,451   |        |   |         | 6,884  |        |   |         | 6,725  |         |   |        | 6,606  |       
|                                                                 | Impairment of long-lived assets                                |                                    |        | 5,111   |         |   |        | 613     |        |   |         | 957    |        |         |        | 1,666  |         |   |         | 4,877   |        |   |         |       |        |   |         |       |         |   |        |       |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 | Other operating expenses                                       |                                    |        | 17,808  |         |   |        | 46,528  |        |   |         | 44,110 |        |         |        | 42,471 |         |   |         | 42,773  |        |   |         | 43,122 |        |   |         | 39,462 |         |   |        | 39,686 |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 |                                                                |                                    | 27,906 |         |         |   | 6,482  |         |        |   | 9,019   |        |        |         | 836    |        |         |   | (2,469  | )       |        |   | 6,341   |        |        |   | 14,156  |        |         |   | 6,462  |       
|Other income (expenses):                                         |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | Business interruption insurance proceeds                       |                                    |        | 1,772   |         |   |        | 6,094   |        |   |         | 1,729  |        |         |        |       |         |   |         |        |        |   |         |       |        |   |         |       |         |   |        |       |       
|                                                                 | Interest income and other                                      |                                    |        | 282     |         |   |        | 348     |        |   |         | 54     |        |         |        | 171    |         |   |         | 360     |        |   |         | 212    |        |   |         | 66     |         |   |        | 43     |       
|                                                                 | Interest expense and other financing costs:                    |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |        |       
|                                                                 |                                                                | Preferred stock dividend           |        |         |        |   |        |         |       |   |         |        |       |         |        |        |        |   |         |         |       |   |         |        | (865   | ) |         |        | (4,233  | ) |        |        | (4,285 | )
|                                                                 |                                                                | Other interest expense             |        |         | (7,045  | ) |        |         | (6,833 | ) |         |        | (6,890 | )       |        |        | (6,907  | ) |         |         | (7,351 | ) |         |        | (7,160 | ) |         |        | (19,310 | ) |        |        | (7,904 | )
|                                                                 |                                                                | Loss on preferred stock redemption |        |         |        |   |        |         |       |   |         |        |       |         |        |        |        |   |         |         |       |   |         |        | (4,471 | ) |         |        | (1,592  | ) |        |        |       |  
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Income (loss) before income taxes and minority interest          |                                                                |                                    | 22,915 |         |         |   | 6,091  |         |        |   | 3,912   |        |        |         | (5,900 | )      |         |   | (9,460  | )       |        |   | (5,943  | )      |        |   | (10,913 | )      |         |   | (5,684 | )     
|Minority interests                                               |                                                                |                                    | (8,486 | )       |         |   | (1,127 | )       |        |   | (120    | )      |        |         | 145    |        |         |   | 406     |         |        |   | 503     |        |        |   | (71     | )      |         |   | (147   | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Income (loss) before income taxes  continuing
    operations    |                                                                |                                    | 14,429 |         |         |   | 4,964  |         |        |   | 3,792   |        |        |         | (5,755 | )      |         |   | (9,054  | )       |        |   | (5,440  | )      |        |   | (10,984 | )      |         |   | (5,831 | )     
|(Provision) benefit for income taxes  continuing
    operations |                                                                |                                    | (6,832 | )       |         |   | (13    | )       |        |   | (68     | )      |        |         | (68    | )      |         |   | 261     |         |        |   | (337    | )      |        |   | (76     | )      |         |   | (76    | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Income (loss) from continuing operations                         |                                                                |                                    | 7,597  |         |         |   | 4,951  |         |        |   | 3,724   |        |        |         | (5,823 | )      |         |   | (8,793  | )       |        |   | (5,777  | )      |        |   | (11,060 | )      |         |   | (5,907 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Discontinued operations:                                         |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |        |        |   |         |        |         |   |        |       
|                                                                 | (Loss) income from discontinued operations before income taxes |                                    |        | 1,442   |         |   |        | 4,758   |        |   |         | (1,850 | )      |         |        | (1,263 | )       |   |         | (4,971  | )      |   |         | 2,040  |        |   |         | 3,813  |         |   |        | (1,179 | )     
|                                                                 | Income tax benefit (provision)                                 |                                    |        | (1,235  | )       |   |        |        |        |   |         |       |        |         |        |       |         |   |         |        |        |   |         |       |        |   |         |       |         |   |        |       |       
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|                                                                 | (Loss) income from discontinued operations                     |                                    |        | 207     |         |   |        | 4,758   |        |   |         | (1,850 | )      |         |        | (1,263 | )       |   |         | (4,971  | )      |   |         | 2,040  |        |   |         | 3,813  |         |   |        | (1,179 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Net income (loss)                                                |                                                                |                                    | 7,804  |         |         |   | 9,709  |         |        |   | 1,874   |        |        |         | (7,086 | )      |         |   | (13,764 | )       |        |   | (3,737  | )      |        |   | (7,247  | )      |         |   | (7,086 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       
|Net income (loss) attributable to common stock                   |                                                                | $                                  | 7,804  |         |         | $ | 9,709  |         |        | $ | 1,874   |        |        | $       | (7,086 | )      |         | $ | (13,764 | )       |        | $ | (3,737  | )      |        | $ | (7,247  | )      |         | $ | (7,086 | )     
|                                                                 |                                                                |                                    |        |         |         |   |        |         |        |   |         |        |        |         |        |        |         |   |         |         |        |   |         |       

F-46



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##### Table of Contents



Index to Exhibits


|        |   |    |             |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | - | -- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |    |            
|Number  |   |    | Description
|        |   |    |            
|        | 2 | .1 |             | Disclosure Statement for Joint Plan of Reorganization of
    Lodgian, Inc., et al(other than the CCA Debtors),
    Together with the Official Committee of Unsecured Creditors
    under Chapter 11 of the Bankruptcy Code, dated
    September 26, 2002) (Incorporated by reference to
    Exhibit 10.6 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).
|        | 2 | .2 |             | First Amended Joint Plan of Reorganization of Lodgian, Inc.,
    et al(Other than CCA Debtors), Together with the
    Official Committee of Unsecured Creditors under Chapter 11
    of the Bankruptcy Code, dated September 26, 2002)
    (Incorporated by reference to Exhibit 10.7 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).               
|        | 2 | .3 |             | Order Confirming First Amended Joint Plan of Reorganization of
    Lodgian, Inc., et alissued on November 5, 2002 by
    the United States Bankruptcy Curt for the Southern District of
    New York (Incorporated by reference to Exhibit 10.8 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                     
|        | 2 | .4 |             | Disclosure Statement for Joint Plan of Reorganization of Impac
    Hotels II, L.L.C. and Impac Hotels III, L.L.C.
    Together with the Official Committee of Unsecured Creditors
    Under Chapter 11 of the Bankruptcy Code (Incorporated by
    reference to Exhibit 10.13.1 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537), filed on March 9, 2004).                         
|        | 2 | .5 |             | Joint Plan of Reorganization of Impac Hotels II, L.L.C. and
    Impac Hotels III, L.L.C. Together with the Official Committee of
    Unsecured Creditors under Chapter 11 of the Bankruptcy Code
    (Incorporated by reference to Exhibit 10.13.2 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                  
|        | 2 | .6 |             | Order Confirming Joint Plan of Reorganization of Impac
    Hotels II, L.L.C. and Impac Hotels III, L.L.C.
    Together with the Official Committee of Unsecured Creditors
    under Chapter 11 of the Bankruptcy Code (Incorporated by
    reference to Exhibit 10.13.3 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537), filed on March 9, 2004).                                 
|        | 2 | .7 |             | Post Confirmation Order and Notice for Joint Plan of
    Reorganization of Impac Hotels III, L.L.C. Together with
    the Official Committee of Unsecured Creditors under
    Chapter 11 of the Bankruptcy Code (Incorporated by
    reference to Exhibit 10.13.4 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537), filed on March 9, 2004).                                       
|        | 3 | .1 |             | 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 6,
    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).                                                                                                                                         
|        | 4 | .4 |             | Registration Rights Agreement, dated as of November 25,
    2002, between Lodgian, Inc. and the other signatories thereto
    (Incorporated by reference to Exhibit 10.11 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                                                           
|        | 4 | .5 |             | Preferred Share Exchange Agreement, dated June 22, 2004, by
    and among Lodgian, Inc. and the record and/or beneficial
    stockholders as signatories thereto (Incorporated by reference
    to Exhibit 10.9 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                                                        



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##### Table of Contents



|        |    |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | --- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|Number  |    |     | Description
|        |    |     |            
|        | 4  | .6  |             | Registration Rights Agreement, dated June, dated June 22,
    2004, by and among Lodgian, Inc. and the signatories thereto
    (Incorporated by reference to Exhibit 10.10 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                                                                                                        
|        | 10 | .1  |             | Loan Agreement, dated as of January 31, 1995, by and among
    Column Financial, Inc., Servico Fort Wayne, Inc.,
    Washington Motel Enterprises, Inc., Servico Hotels I, Inc.,
    Servico Hotels II, Inc., Servico Hotels III, Inc.,
    Servico Hotels IV, Inc., New Orleans Airport Motels Associates,
    Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and
    Moon Airport Hotel, Inc. (Incorporated by reference to
    Exhibit 10.1.1 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                            
|        | 10 | .2  |             | Promissory Note, in original amount of $60.5 million, dated
    as of January 31, 1995, by Servico Fort Wayne, Inc.,
    Washington Motel Enterprises, Inc., Servico Hotels I, Inc.,
    Servico Hotels II, Inc., Servico Hotels III, Inc.,
    Servico Hotels IV, Inc., New Orleans Airport Motels Associates,
    Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and
    Moon Airport Hotel, Inc., in favor of Column Financial, Inc.
    (Incorporated by reference to Exhibit 10.1.2 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).
|        | 10 | .3  |             | Loan and Security Agreement (Floating Rate), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.1.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                                               
|        | 10 | .4  |             | Loan Modification Agreement (Floating Rate) between Merrill
    Lynch Mortgage Lending, Inc. and the Borrowers identified on the
    signature pages thereto dated April 29, 2005 (Incorporated
    by reference to Exhibit 10.40 to the Companys
    Quarterly Report for the period ended March 31, 2005 (File
    No. 1-14537), filed with the Commission on May 10,
    2005.                                                                                                                                                                                                                                                
|        | 10 | .5  |             | Promissory Note A in the original amount of $72,000,000.00,
    dated as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.1.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                           
|        | 10 | .6  |             | Promissory Note B in the original amount of $38,000,000,
    dated as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.1.3
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                              
|        | 10 | .7  |             | Loan and Security Agreement (Fixed Rate #1), dated as of
    June 25, 2004, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.2.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                                         
|        | 10 | .8  |             | Promissory Note in the original amount of $63,801,000.00, dated
    as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.2.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                             
|        | 10 | .9  |             | Loan and Security Agreement (Fixed Rate #2), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.3.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                                               
|        | 10 | .10 |             | Promissory Note in the original amount of $67,864,000.00, dated
    as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.3.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                             
|        | 10 | .11 |             | Loan and Security Agreement (Fixed Rate #3), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.4.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                                                                                                                                               



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##### Table of Contents



|        |    |     |             |                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | --- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|Number  |    |     | Description
|        |    |     |            
|        | 10 | .12 |             | Promissory Note in the original amount of $66,818,500.00, dated
    as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.4.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).      
|        | 10 | .13 |             | Loan and Security Agreement (Fixed Rate #4), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.5.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                        
|        | 10 | .14 |             | Loan Modification Agreement (Fixed Rate #4) dated
    October 17, 2005, by and between Merrill Lynch Mortgage
    Lending, Inc. and certain Lodgian, Inc. subsidiaries
    (Incorporated by reference to Exhibit 99.1 to
    Companys Current Report on Form 8-K. (File
    No. 1-14537), filed on October 21, 2005).                                                                     
|        | 10 | .15 |             | Promissory Note in the original amount of $61,516,500.00, dated
    as of June 25, 2004, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.5.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).
|        | 10 | .16 |             | Employment Agreement with W. Thomas Parrington, dated
    December 18, 2003 (Incorporated by reference to
    Exhibit 10.12 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                                                                                                                     
|        | 10 | .17 |             | Amendment to Employment Agreement between, Lodgian, Inc. and W.
    Thomas Parrington, dated August 3, 2005 (Incorporated by
    reference to Exhibit 10.22 to the Companys Quarterly
    Report for the period ended June 30, 2005 (File
    No. 1-14537), filed on August 9, 2005).                                                                                                     
|        | 10 | .18 |             | Restricted Unit Award Agreement with W. Thomas Parrington, dated
    as of July 15, 2003 (Incorporated by reference to
    Exhibit 10.2 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                      
|        | 10 | .19 |             | Restricted Unit Award Agreement with W. Thomas Parrington, dated
    as of April 9, 2004 (Incorporated by reference to
    Exhibit 10.2 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                      
|        | 10 | .20 |             | Letter Agreement dated January 21, 2005, between Thomas W.
    Parrington and Lodgian, Inc. related to
    Mr. Parringtons waiver of his 2004 Annual performance
    bonus (Incorporated by reference to Exhibit 10.26 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 | .21 |             | Employment Agreement between Lodgian, Inc. and Daniel E. Ellis,
    dated May 2, 2004 (Incorporated by reference to
    Exhibit 10.4 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                         
|        | 10 | .22 |             | 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 | .23 |             | Employment Agreement between Lodgian, Inc. and Manuel E. Artime,
    dated May 10, 2004 (Incorporated by reference to
    Exhibit 10.5 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                       
|        | 10 | .24 |             | Release Agreement, dated January 31, 2004, between Manuel
    E. Artime and Lodgian, Inc. (Incorporated by reference to
    Exhibit 10.29 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 | .25 |             | Employment Agreement between Lodgian, Inc. and Michael W.
    Amaral, dated May 4, 2004 (Incorporated by reference to
    Exhibit 10.6 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                       
|        | 10 | .26 |             | Separation and Release Agreement between Lodgian, Inc. and
    Michael W. Amaral dated October 4, 2005 (Incorporated by
    reference to Exhibit 10.32 to the Companys Quarterly
    Report for the period ended October 31, 2005 (File
    No. 1-14537), filed with the Commission on November 9,
    2005.                                                                              



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##### Table of Contents



|        |    |     |             |                                                                                                                                                                                                                                                                                                                   
|------- | -- | --- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|Number  |    |     | Description
|        |    |     |            
|        | 10 | .27 |             | Employment Agreement between Lodgian, Inc. and Samuel J. Davis,
    dated May 14, 2004 (Incorporated by reference to
    Exhibit 10.19 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1 (Registration
    Number 333-113410), filed with the Commission on
    June 4, 2004).           
|        | 10 | .28 |             | Executive Employment Agreement between Lodgian, Inc. and Linda
    B. Philp, dated February 7, 2005 (Incorporated by reference
    to Exhibit 10.32 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 | .29 |             | Stock Option Award Agreement, dated January 31, 2005,
    between Linda B. Philp and Lodgian, Inc. (Incorporated by
    reference to Exhibit 10.33 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 | .30 |             | Incentive Stock Option Award Agreement, dated January 31,
    2005, between Linda B. Philp and Lodgian, Inc. (Incorporated by
    reference to Exhibit 10.34 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 | .31 |             | Agreement for Consulting Services between Lodgian, Inc. and
    Linda Borchert Philp dated December 19, 2005 (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 December 22, 2005).                              
|        | 10 | .32 |             | Release Agreement between Lodgian, Inc. and Linda Borchert Philp
    dated December 16, 2005 (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 December 22, 2005).                                              
|        | 10 | .33 |             | Incentive Stock Option Award Agreement, dated February 28,
    2005, between Daniel G. Owens and Lodgian, Inc. (Incorporated by
    reference to Exhibit 10.35 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 | .34 |             | Executive Employment Agreement between Edward J. Rohling and
    Lodgian, Inc., dated July 12, 2005 (Incorporated by
    reference to Exhibit 10.35 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 | .35 |             | 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 | .36 |             | Employment Agreement between Lodgian, Inc. and James A.
    MacLennan dated March 1, 2006 (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 3, 2006).                                                     
|        | 10 | .37 |             | 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 | .38 |             | 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 | .39 |             | 2002 Amended and Restated Stock Incentive Plan of Lodgian, Inc.
    (Incorporated by reference to Exhibit 10.5 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1 (File No. 333-1113410), filed on June 6,
    2004).                                                                 
|        | 10 | .40 |             | First Amendment to the Amended and Restated 2002 Stock Incentive
    Plan of Lodgian, Inc. dated April 28, 2005 (Incorporated by
    reference to Exhibit 10.34 to the Companys Quarterly
    Report for the period ended March 31, 2005 (File
    No. 1-14537), filed with the Commission on May 10,
    2005.) 
|        | 10 | .41 |             | 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 | .42 |             | Form of Restricted Stock Award Agreement (Incorporated by
    reference to Exhibit 10.40 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 | .43 |             | Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective
    September 1, 2003 (Incorporated by reference to
    Exhibit 20.1.1 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1 (File
    No. 333-113410), filed on June 6, 2004).                                                 



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##### Table of Contents



|        |    |     |             |                                                                                                                                                                                                                                                                                                                                         
|------- | -- | --- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|Number  |    |     | Description
|        |    |     |            
|        | 10 | .44 |             | Amendment No. 1 to the Lodgian, Inc. 401(k) Plan (As
    Amended and Restated Effective September 1, 2003)
    (Incorporated by reference to Exhibit 10.3 to the
    Companys Quarterly Report for the period ended
    March 31, 2004 (File No. 1-14537), filed with the
    Commission on May 14, 2004).                             
|        | 10 | .45 |             | Amendment No. 2 to the Lodgian, Inc. 401(K) Plan dated
    March 24, 2005 (As Amended and Restated Effective as of
    September 1, 2003). (Incorporated by reference to
    Exhibit 10.38 to the Companys Quarterly Report for
    the period ended March 31, 2005 (File No. 1-14537),
    filed with the Commission on May 10, 2005).
|        | 10 | .46 |             | Amendment No. 3 to the Lodgian, Inc. 401(K) Plan dated
    April 28, 2005 (As Amended and Restated Effective as of
    September 1, 2003). (Incorporated by reference to
    Exhibit 10.39 to the Companys Quarterly Report for
    the period ended March 31, 2005 (File No. 1-14537),
    filed with the Commission on May 10, 2005).
|        | 10 | .47 |             | 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).                                                                              
|        | 14 |     |             | Lodgians Policy on Business Ethics. **                                                                                                                                                                                                                                                                                                 
|        | 21 |     |             | Lodgians list of subsidiaries. **                                                                                                                                                                                                                                                                                                      
|        | 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.