##### Table of Contents





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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008oro

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

52-2093696(State or other jurisdiction
    of
    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 RegisteredCommon Stock, $.01 par value per share

NYSE Alternext US   Securities
    registered pursuant to Section 12(g) of the ActTitle of Each Class Class B
    warrants
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12-b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





LODGIAN,
    INC.Form 10-K
    For the Year Ended December 31, 2008
    TABLE OF CONTENTS
   
 PagePART I.Item 1.


Business

1Item 1A.


Risk Factors

13Item 1B.


Unresolved Staff Comments

23Item 2.


Properties

23Item 3.


Legal Proceedings

23Item 4.


Submission of Matters to a Vote of Security
    Holders

23PART II.Item 5.


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

23Item 6.


Selected Financial Data

27Item 7.


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

28Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk

56Item 8.


Financial Statements and Supplementary Data

57Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

57Item 9A.


Controls and Procedures

57Item 9B.


Other Information

59PART III.Item 10.


Directors, Executive Officers and Corporate
    Governance

59Item 11.


Executive Compensation

59Item 12.


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

59Item 13.


Certain Relationships and Related Transactions,
    and Director Independence

59Item 14.


Principal Accountant Fees and Services

59PART IV.Item 15.


Exhibits, Financial Statement Schedules

59Signatures

60EX-10.6EX-10.7EX-21EX-23EX-31.1EX-31.2EX-32




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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
    
    40 hotels that we wholly own and operate through
    subsidiaries; and
    one hotel that we operate in a joint venture in the form of a
    limited partnership, in which a Lodgian subsidiary serves as the
    general partner, has a 51% voting interest and exercises
    significant control.      Our
    Operations
  day-to-day
   1




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Corporate
    History
          Franchise
    Affiliations
     2




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and/or
  
    One hotel is in default of the franchise agreements because of
    substandard guest satisfaction scores. If we do not achieve
    scores above the required thresholds by the designated cure
    dates, this hotel could be subject to termination of the
    franchise agreement. However, since we recently completed some
    renovations at the hotel, we anticipate that we will be given
    additional time to cure the default.
    One hotel is in default of the franchise agreement for failure
    to complete a Property Improvement Plan. If we do not cure the
    default by April 2009, the hotels franchise agreement
    could be terminated by the franchisor. This hotel is also in
    default of the franchise agreement because of substandard guest
    satisfaction scores. If we do not achieve scores above the
    required thresholds by March 2009, this hotel could be subject
    to termination by the franchisor. However, since the hotel is
    currently under renovation, we anticipate that we will be given
    additional time to cure the defaults.
    One hotel is not in compliance with some of the terms of the
    franchise agreement because of substandard guest scores. If we
    do not achieve scores above the required quality thresholds by
    March 2009, this hotel could be placed in default by the
    franchisor. However, we have met with the franchisor, are
    following a specific action plan for improvement, and anticipate
    that we will cure the failure by the required cure date.
    We are anticipating cure letters for two hotels to be delivered
    no later than February 2010.     3




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Sales and
    Marketing
      day-by-day
  Joint
    Ventures
      Competition
    and Seasonality
   4




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The
    Lodging Industry
    Chain-Scale
    Segmentation
    
    Upper Upscale (Hilton and Marriott);
    Upscale (Courtyard by Marriott, Crowne Plaza, Four Points by
    Sheraton, Radisson, Residence Inn by Marriott, SpringHill Suites
    by Marriott and Wyndham);
    Midscale with Food & Beverage (Holiday Inn, Holiday
    Inn Select); and
    Midscale without Food & Beverage (Fairfield Inn by
    Marriott and Holiday Inn Express);    Properties
  day-to-day
 5




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##### Table of Contents



Portfolio
    Year ofRoom Count




Last Major Renovation orFranchisor/Hotel Name

Held for Use


Held for Sale


Total


Location

ConstructionInterContinental Hotels Group PLC (IHG)Crowne Plaza Albany


384







384


Albany, NY

2001Crowne Plaza Houston


294







294


Houston, TX

1999Crowne Plaza Melbourne


270







270


Melbourne, FL

2006Crowne Plaza Phoenix Airport


295







295


Phoenix, AZ

2004Crowne Plaza Pittsburgh


193







193


Pittsburgh, PA

2001Crowne Plaza Silver Spring


231







231


Silver Spring, MD

2005Crowne Plaza West Palm Beach (51% owned)


219







219


West Palm Beach, FL

Planning and DiligenceCrowne Plaza Worcester


243







243


Worcester, MA

Being RenovatedHoliday Inn BWI Airport


260







260


Baltimore, MD

Being RenovatedHoliday Inn Cromwell Bridge






139



139


Cromwell Bridge, MD

2000Holiday Inn East Hartford






130



130


East Hartford, CT

2000Holiday Inn Hilton Head


202







202


Hilton Head, SC

2008Holiday Inn Inner Harbor


375







375


Baltimore, MD

Being RenovatedHoliday Inn Meadowlands


138







138


Pittsburgh, PA

2005Holiday Inn Monroeville


187







187


Monroeville, PA

Planning and DiligenceHoliday Inn Myrtle Beach


133







133


Myrtle Beach, SC

2006Holiday Inn Phoenix West






144



144


Phoenix, AZ

2003Holiday Inn Santa Fe


130







130


Santa Fe, NM

2003Holiday Inn Express Palm Desert


129







129


Palm Desert, CA

2003Holiday Inn Select Strongsville


303







303


Cleveland, OH

2005Holiday Inn Select Windsor






214



214


Windsor, Ontario

2004Total IHG Room Count


3,986



627



4,613Total IHG Hotel Count


17



4



21Marriott International Inc.Courtyard by Marriott Abilene


100







100


Abilene, TX

2004Courtyard by Marriott Bentonville


90







90


Bentonville, AR

2004Courtyard by Marriott Buckhead


181







181


Atlanta, GA

2008Courtyard by Marriott Florence


78







78


Florence, KY

2004Courtyard by Marriott Lafayette


90







90


Lafayette, LA

2004Courtyard by Marriott Paducah


100







100


Paducah, KY

2004Courtyard by Marriott Tulsa


122







122


Tulsa, OK

2004Fairfield Inn by Marriott Merrimack


115







115


Merrimack, NH

2002Marriott Denver Airport


238







238


Denver, CO

2008Residence Inn by Marriott Dedham


81







81


Dedham, MA

2004Residence Inn by Marriott Little Rock


96







96


Little Rock, AR

2004SpringHill Suites by Marriott Pinehurst


107







107


Pinehurst, NC

2007Total Marriott Room Count


1,398







1,398Total Marriott Hotel Count


12







12 6




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Year ofRoom Count




Last Major Renovation orFranchisor/Hotel Name

Held for Use


Held for Sale


Total


Location

ConstructionHilton Hotels CorporationHilton Columbia


152







152


Columbia, MD

Planning and DiligenceHilton Fort Wayne


244







244


Fort Wayne, IN

Being RenovatedHilton Northfield






191



191


Troy, MI

2003Total Hilton Room Count


396



191



587Total Hilton Hotel Count


2



1



3Carlson CompaniesRadisson New Orleans Airport Plaza


244







244


New Orleans, LA

2005Radisson Phoenix


159







159


Phoenix, AZ

2005Total Carlson Room Count


403







403Total Carlson Hotel Count


2







2Starwood Hotels & Resorts Worldwide, Inc.Four Points by Sheraton Philadelphia(1)


190







190


Philadelphia, PA

2008Total Starwood Room Count


190







190Total Starwood Hotel Count


1







1Wyndham Hotels and Resorts, LLCWyndham DFW Airport North


282







282


Dallas, TX

2008Total Wyndham Room Count


282







282Total Wyndham Hotel Count


1







1Non-branded hotelsFrench Quarter Suites Memphis(2)






105



105


Memphis, TN

1997Total Non-branded Room Count






105



105Total Non-branded Hotel Count






1



1Grand Total Room Count


6,655



923



7,578Grand Total Hotel Count


35



6



41     (1)
    
    This hotel converted from a DoubleTree Club in January 2008.(2)
    
    This hotel is currently closed.  Dispositions
    Number ofHotelsOwned at December 31, 2006


69Sold in 2007


(23
)Owned at December 31, 2007


46Sold in 2008


(5
)Owned at December 31, 2008


41  7




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##### Table of Contents



Hotel
    data by market segment and region
    Hotel
    data by market segment and region
      Combined
    Continuing and Discontinued Operations  40 hotels
    (excludes the Memphis hotel)
  2008


2007


2006Upper UpscaleNumber of properties


4



4



4Number of rooms


825



825



825Occupancy


69.3
%


72.4
%


68.3
%Average daily rate

$
120.07


$
118.74


$
113.65RevPAR

$
83.23


$
86.00


$
77.67UpscaleNumber of properties


22



21



20Number of rooms


4,048



3,858



3,576Occupancy


70.4
%


68.2
%


68.4
%Average daily rate

$
106.26


$
107.85


$
106.13RevPAR

$
74.78


$
73.61


$
72.61Midscale with Food & BeverageNumber of properties


12



13



14Number of rooms


2,355



2,545



2,827Occupancy


66.8
%


69.9
%


68.3
%Average daily rate

$
98.49


$
101.56


$
96.12RevPAR

$
65.81


$
70.97


$
65.69Midscale without Food & BeverageNumber of properties


2



2



2Number of rooms


244



244



244Occupancy


52.4
%


58.0
%


58.6
%Average daily rate

$
90.93


$
90.00


$
87.58RevPAR

$
47.69


$
52.24


$
51.34All HotelsNumber of properties


40



40



40Number of rooms


7,472



7,472



7,472Occupancy


68.6
%


68.9
%


68.1
%Average daily rate

$
105.03


$
106.45


$
102.63RevPAR

$
72.00


$
73.38


$
69.85  8




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Continuing
    Operations  35 hotels
  2008


2007


2006Upper UpscaleNumber of properties


3



3



3Number of rooms


634



634



634Occupancy


70.1
%


73.9
%


70.0
%Average daily rate

$
126.36


$
124.78


$
118.16RevPAR

$
88.55


$
92.22


$
82.76UpscaleNumber of properties


22



21



20Number of rooms


4,048



3,858



3,576Occupancy


70.4
%


68.2
%


68.4
%Average daily rate

$
106.26


$
107.85


$
106.13RevPAR

$
74.78


$
73.61


$
72.61Midscale with Food & BeverageNumber of properties


8



9



10Number of rooms


1,728



1,918



2,200Occupancy


68.5
%


70.3
%


68.4
%Average daily rate

$
99.15


$
101.65


$
95.85RevPAR

$
67.92


$
71.46


$
65.56Midscale without Food & BeverageNumber of properties


2



2



2Number of rooms


244



244



244Occupancy


52.4
%


58.0
%


58.6
%Average daily rate

$
90.93


$
90.00


$
87.58RevPAR

$
47.69


$
52.24


$
51.34All HotelsNumber of properties


35



35



35Number of rooms


6,654



6,654



6,654Occupancy


69.2
%


69.0
%


68.2
%Average daily rate

$
105.95


$
107.21


$
103.30RevPAR

$
73.32


$
73.97


$
70.46       
    Northeast:  Canada, Connecticut, Massachusetts,
    Maryland, New Hampshire, New York, Ohio, Pennsylvania;
    Southeast:  Florida, Georgia, Kentucky, Louisiana,
    North Carolina, South Carolina;
    Midwest:  Arkansas, Indiana, Michigan, Oklahoma,
    Texas; and
    West:  Arizona, California, Colorado, New Mexico. 9




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Combined
    Continuing and Discontinued Operations  40 hotels
    (excludes the Memphis hotel)
  2008


2007


2006Northeast RegionNumber of properties


16



16



16Number of rooms


3,335



3,335



3,335Occupancy


65.7
%


67.9
%


66.8
%Average daily rate

$
105.67


$
106.32


$
103.65RevPAR

$
69.38


$
72.17


$
69.26Southeast RegionNumber of properties


10



10



10Number of rooms


1,624



1,624



1,624Occupancy


71.4
%


70.0
%


67.5
%Average daily rate

$
108.69


$
112.31


$
113.30RevPAR

$
77.57


$
78.61


$
76.45Midwest RegionNumber of properties


8



8



8Number of rooms


1,418



1,418



1,418Occupancy


68.0
%


63.2
%


68.0
%Average daily rate

$
98.72


$
98.27


$
89.23RevPAR

$
67.13


$
62.11


$
60.70West RegionNumber of properties


6



6



6Number of rooms


1,095



1,095



1,095Occupancy


73.9
%


77.9
%


72.7
%Average daily rate

$
105.58


$
107.57


$
101.45RevPAR

$
78.02


$
83.81


$
73.75All HotelsNumber of properties


40



40



40Number of rooms


7,472



7,472



7,472Occupancy


68.6
%


68.9
%


68.1
%Average daily rate

$
105.03


$
106.45


$
102.63RevPAR

$
72.00


$
73.38


$
69.85  10




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##### Table of Contents



Continuing
    Operations  35 hotels.
  2008


2007


2006Northeast RegionNumber of properties


13



13



13Number of rooms


2,852



2,852



2,852Occupancy


66.5
%


68.2
%


66.8
%Average daily rate

$
106.97


$
107.56


$
105.23RevPAR

$
71.16


$
73.35


$
70.34Southeast RegionNumber of properties


10



10



10Number of rooms


1,624



1,624



1,624Occupancy


71.4
%


70.0
%


67.5
%Average daily rate

$
108.69


$
112.31


$
113.30RevPAR

$
77.57


$
78.61


$
76.45Midwest RegionNumber of properties


7



7



7Number of rooms


1,227



1,227



1,227Occupancy


68.2
%


62.5
%


68.9
%Average daily rate

$
98.81


$
98.52


$
88.14RevPAR

$
67.38


$
61.61


$
60.69West RegionNumber of properties


5



5



5Number of rooms


951



951



951Occupancy


74.8
%


78.0
%


72.7
%Average daily rate

$
107.13


$
107.42


$
100.78RevPAR

$
80.18


$
83.79


$
73.25All HotelsNumber of properties


35



35



35Number of rooms


6,654



6,654



6,654Occupancy


69.2
%


69.0
%


68.2
%Average daily rate

$
105.95


$
107.21


$
103.30RevPAR

$
73.32


$
73.97


$
70.46   Hotel
    Encumbrances
    Insurance
    
    general liability;
    property damage and business interruption (including coverage
    for terrorism);
    flood;
    directors and officers liability; 11




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
    liquor liability;
    workers compensation;
    fiduciary liability;
    business automobile; and
    employment practices liability insurance.      Regulation
          Employees
   12




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Legal
    Proceedings
    SEC
    Filings and Financial Information
  Form 10-K, Form 10-Q, Form 8-K,
  1-800-SEC-0330. (http://www.sec.gov)
  page F-1.
  Item 1A.
    Risk
    Factors    
    Our ability to refinance or extend the portion of our mortgage
    indebtedness that is scheduled to mature in 2009;
    The effects of regional, national and international economic
    conditions;
    Competitive conditions in the lodging industry and increases in
    room supply;
    The effects of actual and threatened terrorist attacks and
    international conflicts in the Middle East and elsewhere, and
    their impact on domestic and international travel;
    The effectiveness of changes in management and our ability to
    retain qualified individuals to serve in senior management
    positions;
    Requirements of franchise agreements, including the right of
    franchisors to immediately terminate their respective agreements
    if we breach certain provisions;
    Our ability to complete planned hotel dispositions;
    Seasonality of the hotel business;
    The effects of unpredictable weather events such as hurricanes;
    The financial condition of the airline industry and its impact
    on air travel;
    The effect that Internet reservation channels may have on the
    rates that we are able to charge for hotel rooms;
    Increases in the cost of debt and our continued compliance with
    the terms of our loan agreements;
    The effect of self-insured claims in excess of our reserves, or
    our ability to obtain adequate property and liability insurance
    to protect against losses, or to obtain insurance at reasonable
    rates; 13




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
    Potential litigation
    and/or
    governmental inquiries and investigations;
    Laws and regulations applicable to our business, including
    federal, state or local hotel, resort, restaurant or land use
    regulations, employment, labor or disability laws and
    regulations;
    A downturn in the economy due to several factors, including but
    not limited to, high energy costs, natural gas and gasoline
    prices;
    The impact of continued disruptions in the stock and credit
    markets and potential failures of financial institutions on our
    ability to access capital, and
    The risks identified below under Risks Related to Our
    Business and Risks Related to Our Common Stock.      Risks
    Related to Our Business
  We may
    be unable to refinance, extend or repay our substantial mortgage
    indebtedness maturing in July 2009, which could have a material
    adverse effect on our business, financial condition, results of
    operations and stock price.
       14




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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.
    and/or
      Hotels
    typically require a higher level of capital expenditures,
    maintenance and repairs than other building types. If we are not
    able to meet the requirements of our hotels appropriately, our
    business and operating results will suffer.
  and/or
  Market
    conditions and other factors may limit our ability to repay,
    extend or refinance our debt and fund our future capital needs.
    Even if we are able to refinance or extend our indebtedness, a
    substantial amount of indebtedness could limit our operational
    flexibility or otherwise adversely affect our financial
    condition.
   15




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The
    terms of our debt instruments place many restrictions on us,
    which reduce operational flexibility and create default
    risks.
     16




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Increases
    in interest rates could have an adverse effect on our cash flow
    and interest expense.
    The
    value of our hotels and our ability to service our indebtedness
    is dependent upon the successful operation and cash flows of our
    hotels. 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.
    
    Effects of the severe global recession and the adverse
    conditions of the real estate and banking industries;
    Changes in interest rates and changes in the availability, cost
    and terms of credit;
    Cyclical overbuilding in the lodging industry;
    Varying levels of demand for rooms and related services;
    Competition in our markets 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;
    Loss of franchise affiliations;
    Decreases in air travel or other adverse changes in travel
    patterns;
    Fluctuations in operating costs, including but not limited to,
    labor, food, and energy costs;
    The need for renovations and the effectiveness of renovations or
    repositioning in attracting customers;
    Changes in governmental laws and regulations that influence or
    determine wages or required remedial expenditures;
    Natural disasters, including, but not limited to hurricanes;
    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.; and
    The perception of the lodging industry and lodging companies in
    the debt and equity markets.  The
    global economic crisis and adverse economic conditions in the
    specific major metropolitan markets in which we do substantial
    business could materially and adversely affect our business and
    results of operations.
   17




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If we
    are not able to execute our strategic initiatives, we may not be
    able to improve our financial performance.
    We
    have a history of significant losses and we may not be able to
    successfully improve our performance to achieve
    profitability.
  and/or
  Force
    majeure events, including natural disasters, acts and threats of
    terrorism, the ongoing war against terrorism, military conflicts
    and other factors have had and may continue to have a negative
    effect on the lodging industry and our results of
    operations.
   18




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Our
    expenses may remain constant or increase even if revenues
    decline.
    
    Rising interest rates;
    Tightening of funding available to the lodging industry on
    favorable terms, or at all;
    Rising energy costs, gasoline or heating fuel supply shortages;
    Rising insurance premiums;
    Rising property tax expenses;
    Increase in labor and related costs; and
    Changes in, and as a result, increases in the cost of compliance
    with new governmental regulations, including those governing
    environmental, usage, zoning and tax matters.  We may
    make acquisitions or investments that are not successful and
    that adversely affect our ongoing operations.
    
    Significant errors or miscalculations in identifying suitable
    acquisition or investment candidates, performing appropriate due
    diligence, identifying potential liabilities and negotiating
    favorable terms;
    Reducing our working capital and hindering our ability to expand
    or maintain our business, including making capital expenditures
    and funding operations;
    The potential distraction of our management, diversion of our
    resources and disruption of our business;
    Overpaying by competing for acquisition opportunities with
    resourceful competitors;
    Inaccurate forecasting of the financial impact of an acquisition
    or investment; and
    Failure to effectively integrate acquired companies or
    investments into our Company and the resultant inability to
    achieve expected synergies.  Losses
    may exceed our insurance coverage or estimated reserves, which
    could impair our results of operations, financial condition and
    liquidity.
      
    the insurance coverages that we have obtained will fully protect
    us against insurable losses (i.e., losses may exceed coverage
    limits); or,
    we will not incur losses from risks that are not insurable or
    that are not economically insurable. 19




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Competition
    in the lodging industry could have a material adverse effect on
    our business and 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 and Board of Directors.
      Our
    success is dependent on recruiting and retaining high caliber
    key personnel.
   20




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##### Table of Contents



The
    increasing use of third-party travel websites by consumers may
    adversely affect our profitability.
    We
    will be unable to utilize all of our net operating loss
    carryforwards.
    Many
    aspects of our operations are subject to government regulations,
    and changes in these regulations may adversely affect our
    results of operations and financial condition.
    Costs
    of compliance with environmental laws and regulations could
    adversely affect operating results.
         21




---



##### Table of Contents



Risks
    Related to Our Common Stock
  Our
    stock price may be volatile, and consequently, investors may be
    unable to resell their common stock at or above their purchase
    price.
    
    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;
    Concentration of ownership;
    The extent of institutional investor interest in us;
    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 their sale of our common stock.
   22




---



##### Table of Contents



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   PART II  Item 5.
    Market
    For Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Historical
    Data
    2007High


LowFirst Quarter

$
15.26


$
11.97Second Quarter

$
16.84


$
12.76Third Quarter

$
15.50


$
9.88Fourth Quarter

$
12.79


$
10.81   23




---



##### Table of Contents



2008High


LowFirst Quarter

$
11.93


$
8.26Second Quarter

$
11.39


$
7.61Third Quarter

$
9.67


$
6.63Fourth Quarter

$
7.76


$
1.19   2009High


LowFirst Quarter (up to March 1, 2009)

$
3.46


$
1.50       Stock
    Repurchase Programs
        Equity
    Compensation Plan Information
    Number ofNumber of





Securities RemainingSecurities to be


Weighted-Average


Available for FutureIssued Upon


Exercise Price of


Issuance UnderExercise


Outstanding


Equity Compensationof Outstanding


Options,


Plans (ExcludingOptions, Warrants


Warrants and


Securities Reflectedand Rights (1)


Rights


in Column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


174,911(1
)(2)


10.66



2,499,921(3
)Equity compensations plans not approved by security holders










     (1)
    
    Column (a) excludes Class B warrants which are not a
    component of the Stock Incentive Plan. 24




---



##### Table of Contents



(2)
    
    All of these awards have been granted under the Stock Incentive
    Plan.(3)
    
    After taking into account the outstanding options, the exercised
    options and the shares of nonvested common stock, we have
    2,499,921 shares of common stock available for grant under
    the Stock Incentive Plan.    :
  Issued Underthe StockIncentive PlanAvailable under the plan, less previously issued as of
    December 31, 2007


2,536,666Nonvested stock issued January 22, 2008


(76,500
)Nonvested stock issued February 12, 2008


(24,000
)Shares of nonvested stock withheld from awards to satisfy tax
    withholding obligations


11,257Nonvested shares forfeited in 2008


17,335Stock options forfeited in 2008


35,163Available for issuance, December 31, 2008


2,499,921   Treasury
    Stock Repurchases
   25




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##### Table of Contents



Performance
    Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    Among Lodgian, Inc., The Dow Jones Wilshire 5000
    Index And The Dow Jones US Hotels Index
  
   *
    $100 invested on 12/31/03 in stock & index-including
    reinvestment of dividends. Fiscal year ending December 31. ©
  12/03


12/04


12/05


12/06


12/07


12/08Lodgian, Inc.



100.00




78.10




68.13




86.35




71.49




13.52Dow Jones Wilshire 5000



100.00




112.48




119.65




138.52




146.30




91.83Dow Jones US Hotels



100.00




146.13




159.51




203.69




172.68




78.30  26




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Selected
    Consolidated Financial Data
      Form 10-K.
  Form 10-K, page F-1.
  (In thousands, except per-share data)2008


2007


2006


2005


2004Income statement data:Revenues  continuing operations

$
240,428


$
242,558


$
227,635


$
187,747


$
184,076Revenues  discontinued operations


31,199



75,592



124,136



152,480



176,232Revenues  continuing and discontinued operations


271,627



318,150



351,771



340,227



360,308(Loss) income  continuing operations


(12,911
)


(5,581
)


(10,438
)


9,830



(22,070
)Income (loss)  discontinued operations


927



(2,865
)


(4,738
)


2,471



(9,764
)Net (loss) income


(11,984
)


(8,446
)


(15,176
)


12,301



(31,834
)Basic (loss) earnings per common share:(Loss) income  continuing operations


(0.59
)


(0.23
)


(0.42
)


0.40



(1.60
)Income (loss)  discontinued operations


0.04



(0.12
)


(0.19
)


0.10



(0.71
)Net (loss) income


(0.55
)


(0.35
)


(0.62
)


0.50



(2.30
)Diluted (loss) earnings per common share:(Loss) income  continuing operations


(0.59
)


(0.23
)


(0.42
)


0.40



(1.60
)Income (loss)  discontinued operations


0.04



(0.12
)


(0.19
)


0.10



(0.71
)Net (loss) income


(0.55
)


(0.35
)


(0.62
)


0.50



(2.30
)Basic weighted average shares


21,774



24,292



24,617



24,576



13,817Diluted weighted average shares


21,774



24,292



24,617



24,630



13,817Balance sheet data (at period end):Total assets

$
555,414


$
624,730


$
699,158


$
726,685


$
723,648Assets held for sale


33,021



8,009



89,437



14,866



30,559Long-term liabilities


194,800



355,728



292,301



394,432



393,143Liabilities related to assets held for sale


16,167



961



68,351



4,610



30,572Total liabilities


368,009



404,142



446,122



466,424



495,385Total stockholders equity


187,405



220,588



242,114



249,044



226,634  27




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation  You should read the discussion below in conjunction with the
    consolidated financial statements and accompanying notes. Also,
    the discussion which follows contains forward-looking statements
    which involve risks and uncertainties. Our actual results could
    differ materially from those anticipated in these
    forward-looking statements as a result of various factors,
    including those discussed above under the caption Risk
    Factors.
  Executive
    Summary
            Overview
    of Continuing Operations
    
    Revenues decreased $2.1 million, or 0.9%. Rooms revenues
    decreased $1.1 million, or 0.6%, as ADR fell 1.2% and
    occupancy remained relatively flat, increasing 0.3%. Food and
    beverage revenues decreased $1.5 million, or 2.8%, driven
    largely by lower banquet revenues.
    Operating income declined $12.1 million primarily as a
    result of impairment charges, casualty losses and margin erosion
    driven by the weakened economy.  Overview
    of Discontinued Operations
   28




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
        Consolidation policy 
   29




---



##### Table of Contents



Deferral policy 
  Asset impairment 
                  Accrual of self-insured obligations 
 30




---



##### Table of Contents



Income
    Statement Overview
    Revenues
    
    Rooms 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. To obtain available
    room nights for a particular period, we multiply the number of
    rooms in each hotel by the number of days the hotel was open;
    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 for a particular period by the
    total available room nights over the same period. Our
    calculation of total room revenues and the number of available
    rooms is adjusted, as appropriate, for the opening and closing
    of hotels in our portfolio. Our RevPAR can also be calculated by
    multiplying our occupancy for a particular period by our average
    daily rate over the same period.    Operating
    expenses
    
    Direct operating expenses  these expenses tend to
    vary with available rooms and occupancy. However, hotel level
    expenses contain significant elements of fixed costs and,
    therefore, do not decline proportionately with revenues. Direct
    expenses are further categorized as follows:
    Rooms expenses  expenses incurred in generating room
    revenues; 31




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##### Table of Contents




    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
    revenues.  and/or
  
    Other hotel operating expenses  these expenses
    include salaries for hotel management, advertising and
    promotion, franchise fees, repairs and maintenance and utilities;
    Property and other taxes, insurance and leases  these
    expenses include equipment, ground and building rentals,
    insurance, and property, franchise and other taxes;
    Corporate and other  these expenses include corporate
    salaries and benefits, legal, accounting and other professional
    fees, directors fees, costs for office space and
    information technology costs. Also included are costs related to
    compliance with Sarbanes-Oxley legislation;
    Casualty (gains) losses, net   these expenses include
    hurricane and other repair costs and charges related to the
    assets written off that were damaged, netted against any gains
    realized on the final settlement of property damage claims;
    Depreciation and amortization  depreciation of fixed
    assets (primarily hotel assets) and amortization of deferred
    franchise fees; and
    Impairment of long-lived assets  charges required to
    write down the carrying values of long-lived assets to the fair
    values of assets where the estimated undiscounted cash flows
    over the life of the asset were less than the carrying value of
    the asset.  Non-operating
    items
    
    Business interruption insurance proceeds represent insurance
    proceeds for lost profits as a result of a business shutdown.
    Our 2008 business interruption proceeds relate primarily to the
    recovery of lost profits and reimbursement for additional
    expenses incurred at the Holiday Inn Hotel & Suites
    Marietta, which was closed as a result of the fire in January
    2006.
    Interest expense and other financing costs represent interest
    expense, which includes amortization of deferred loan costs and
    changes in the fair value of interest rate caps;
    Interest income; and
    Minority interests  our equity partners share
    of the income or loss of the hotel owned by joint venture that
    we consolidate. 32




---



##### Table of Contents



Results
    of Operations  Continuing Operations
  Results
    of operations for the years ended December 31, 2008 and
    December 31, 2007
  Revenues 
    Continuing Operations
  2008


2007


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

$
178,623


$
179,716


$
(1,093
)


(0.6
)%Food and beverage


53,543



55,089



(1,546
)


(2.8
)%Other


8,262



7,753



509



6.6
%Total revenues

$
240,428


$
242,558


$
(2,130
)


(0.9
)%Occupancy


69.2
%


69.0
%






0.3
%ADR

$
105.95


$
107.21



(1.26
)


(1.2
)%RevPAR

$
73.32


$
73.97



(0.65
)


(0.9
)%        33




---



##### Table of Contents



Direct
    operating expenses  Continuing Operations
  % of Total Revenues2008


2007


Increase (decrease)


2008


2007($ in thousands)Direct operating expenses:Rooms

$
46,588


$
44,833


$
1,755



3.9
%


19.4
%


18.5
%Food and beverage


36,755



37,239



(484
)


(1.3
)%


15.3
%


15.4
%Other


5,806



5,503



303



5.5
%


2.4
%


2.3
%Total direct operating expenses

$
89,149


$
87,575


$
1,574



1.8
%


37.1
%


36.1
%Direct operating contribution (by revenue source):Rooms

$
132,035


$
134,883


$
(2,848
)


(2.1
)%Food and beverage


16,788



17,850



(1,062
)


(5.9
)%Other


2,456



2,250



206



9.2
%Total direct operating contribution

$
151,279


$
154,983


$
(3,704
)


(2.4
)%Direct operating contribution % (by revenue source):Rooms


73.9
%


75.1
%Food and beverage


31.4
%


32.4
%Other


29.7
%


29.0
%Total direct operating contribution


62.9
%


63.9
%        34




---



##### Table of Contents



Other
    operating expenses  Continuing Operations
  % of Total Revenues2008


2007


Increase (decrease)


2008


2007($ in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative

$
15,042


$
14,563


$
479



3.3
%


6.3
%


6.0
%Advertising and promotion


12,587



12,880



(293
)


(2.3
)%


5.2
%


5.3
%Franchise fees


17,145



16,967



178



1.0
%


7.1
%


7.0
%Repairs and maintenance


11,636



10,894



742



6.8
%


4.8
%


4.5
%Utilities


13,213



12,720



493



3.9
%


5.5
%


5.2
%Other expenses


337



599



(262
)


(43.7
)%


0.1
%


0.2
%Other hotel operating costs


69,960



68,623


$
1,337



1.9
%


29.1
%


28.3
%Property and other taxes, insurance, and leases


16,561



17,662



(1,101
)


(6.2
)%


6.9
%


7.3
%Corporate and other


16,805



21,391



(4,586
)


(21.4
)%


7.0
%


8.8
%Casualty (gains) losses, net


1,095



(1,867
)


2,962



(158.7
)%


0.5
%


(0.8
)%Restructuring






1,232



(1,232
)


(100.0
)%


0.0
%


0.5
%Depreciation and amortization


31,930



28,765



3,165



11.0
%


13.3
%


11.9
%Impairment of long-lived assets


9,468



1,622



7,846



483.7
%


3.9
%


0.7
%Total other operating expenses

$
145,819


$
137,428


$
8,391



6.1
%


60.6
%


56.7
%Total operating expenses

$
234,968


$
225,003


$
9,965



4.4
%


97.7
%


92.8
%Operating income

$
5,460


$
17,555


$
(12,095
)


(68.9
)%


2.3
%


7.2
%       
    General and administrative costs increased $0.5 million. As
    a percent of revenues, general and administrative expenses
    increased 30 basis points in 2008 to 6.3%. The increase was
    due in large part to higher employee medical costs. In addition,
    we benefited from sales tax credits and bad debt recoveries in
    2007 that did not recur in 2008.
    Advertising and promotion costs decreased $0.3 million, or
    2.3%, driven by cost containment initiatives.
    Franchise fees increased $0.2 million, or 1.0%, but
    remained relatively constant as a percentage of revenues.
    Repairs and maintenance expenses increased $0.7 million, or
    6.8%, primarily as a result of increased automotive maintenance
    costs and higher medical costs. As a percentage of total
    revenues, repairs and maintenance costs increased 30 basis
    points from 4.5% in 2007 to 4.8% in 2008.
    Utilities costs increased $0.5 million, or 3.9%. This
    increase is driven largely by higher energy rates. As a
    percentage of total revenues, utilities costs increased
    30 basis points to 5.5% in 2008. 35




---



##### Table of Contents




    Other expenses decreased $0.3 million, or 43.7%. In 2007,
    we incurred costs associated with a hotel brand conversion. Such
    costs were not incurred at the same level in 2008.      
    We realized $2.0 million in savings due to reductions in
    corporate staffing.
    $1.4 million in lower public company related costs such as
    audit fees, Sarbanes-Oxley compliance costs and Director and
    Officer Insurance.
    In January 2007, we announced a review of strategic alternatives
    to enhance shareholder value. During 2007, we incurred
    $1.5 million in related costs. Similar costs were not
    incurred in 2008.
    These decreases were partially offset by $1.1 million in
    costs associated with the resignation of Mr. Edward
    Rohling, our former President and Chief Executive Officer.          Non-operating
    income (expenses)  Continuing Operations
  2008


2007


Increase (decrease)($ in thousands)Non-operating income (expenses):Interest income and other


1,054



3,944



(2,890
)


(73.3
)%Interest expense


(19,345
)


(23,172
)


(3,827
)


(16.5
)%Loss on debt extinguishment






(3,330
)


(3,330
)


n/m        36




---



##### Table of Contents



Results
    of operations for the years ended December 31, 2007 and
    December 31, 2006
  Revenues 
    Continuing Operations
  2007


2006


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

$
179,716


$
170,764


$
8,952



5.2
%Food and beverage


55,089



49,807



5,282



10.6
%Other


7,753



7,064



689



9.8
%Total revenues


242,558



227,635



14,923



6.6
%Occupancy


69.0
%


68.2
%






1.2
%ADR

$
107.21


$
103.30


$
3.91



3.8
%RevPAR

$
73.97


$
70.46


$
3.51



5.0
%         Direct
    operating expenses  Continuing Operations
  % of Total Revenues2007


2006


Increase (decrease)


2007


2006($ in thousands)Direct operating expenses:Rooms

$
44,833


$
43,329


$
1,504



3.5
%


18.5
%


19.0
%Food and beverage


37,239



34,861



2,378



6.8
%


15.4
%


15.3
%Other


5,503



5,402



101



1.9
%


2.3
%


2.4
%Total direct operating expenses

$
87,575


$
83,592


$
3,983



4.8
%


36.1
%


36.7
%Direct operating contribution (by revenue source):Rooms

$
134,883


$
127,435


$
7,448



5.8
%Food and beverage


17,850



14,946



2,904



19.4
%Other


2,250



1,662



588



35.4
%Total direct operating contribution

$
154,983


$
144,043


$
10,940



7.6
%Direct operating contribution % (by revenue source):Rooms


75.1
%


74.6
%Food and beverage


32.4
%


30.0
%Other


29.0
%


23.5
%Total direct operating contribution


63.9
%


63.3
%  37




---



##### Table of Contents



Other
    operating expenses  Continuing Operations
  % of Total Revenues2007


2006


Increase (decrease)


2007


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

$
14,563


$
12,995


$
1,568



12.1
%


6.0
%


5.7
%Advertising and promotion


12,880



11,279



1,601



14.2
%


5.3
%


5.0
%Franchise fees


16,967



15,879



1,088



6.9
%


7.0
%


7.0
%Repairs and maintenance


10,894



10,842



52



0.5
%


4.5
%


4.8
%Utilities


12,720



12,290



430



3.5
%


5.2
%


5.4
%Other expenses


599



182



417



229.1
%


0.2
%


0.1
%Total other hotel operating expenses


68,623



63,467



5,156



8.1
%


28.3
%


27.9
%Property and other taxes, insurance and leases


17,662



17,383



279



1.6
%


7.3
%


7.6
%Corporate and other


21,391



20,693



698



3.4
%


8.8
%


9.1
%Casualty (gains) losses, net


(1,867
)


(2,985
)


1,118



(37.5
)%


(0.8
)%


(1.3
)%Restructuring


1,232







1,232



n/m



0.5
%


0.0
%Depreciation and amortization


28,765



27,414



1,351



4.9
%


11.9
%


12.0
%Impairment of long-lived assets


1,622



632



990



156.6
%


0.7
%


0.3
%Total other operating expenses

$
137,428


$
126,604


$
10,824



8.5
%


56.7
%


55.6
%Total operating expenses

$
225,003


$
210,196


$
14,807



7.0
%


92.8
%


92.3
%Operating income

$
17,555


$
17,439


$
116



0.7
%


7.2
%


7.7
%     
    General and administrative costs increased $1.6 million. As
    a percent of revenues, general and administrative expenses
    increased 30 basis points in 2007 to 6.0%. The increase was
    due in large part to higher payroll costs (fewer vacant
    positions and higher caliber employees), legal and other
    professional fees, relocation, and travel and training costs.
    Advertising and promotion costs increased $1.6 million, or
    14.2%. As a percentage of revenues, advertising and promotional
    costs increased 30 basis points from 5.0% in 2006 to 5.3%
    in 2007. The increase is largely attributable to staffing
    related to sales and marketing programs designed to drive higher
    revenues.
    Franchise fees increased $1.1 million, or 6.9%, primarily
    as a result of revenue growth. As a percentage of revenues,
    franchise fees remained flat year over year at 7.0%. 38




---



##### Table of Contents




    Repairs and maintenance expenses were essentially flat to the
    prior year, resulting from improved preventive maintenance
    programs and the execution of our capital expenditures plan. As
    a percentage of total revenues, repairs and maintenance costs
    decreased 30 basis points from 4.8% in 2006 to 4.5% in 2007.
    Utilities costs increased $0.4 million, or 3.5%. This
    increase is driven largely by higher occupancy. As a percentage
    of total revenues, utilities costs decreased 20 basis
    points to 5.2% in 2007.      
    In January 2007, we announced a review of strategic alternatives
    to enhance shareholder value. During 2007, we incurred
    $1.5 million in related costs. Similar costs were not
    incurred in 2006.
    $0.4 million related to the amortization of non-vested
    stock awards granted to our Board of Directors in February 2007.
    Two members of the Board did not stand for reelection at the
    April 2007 annual meeting of stockholders. In addition, one
    Board member resigned in August 2007 and another Board member
    resigned in December 2007. The Board of Directors elected to
    accelerate the vesting of the awards for all four of these
    members and the related expense was recorded. The stock awarded
    to the remaining members of our Board of Directors is being
    amortized over a three-year vesting period at an annualized rate
    of $0.1 million.
    These increases in costs were largely offset by lower payroll
    and related expenses primarily as a result of the August 2007
    restructuring plan.          Non-operating
    income (expenses)  Continuing Operations
  2007


2006


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

$



$
3,094


$
(3,094
)


n/mInterest income and other


3,944



2,558



1,386



54.2
%Interest expense


(23,172
)


(21,970
)


1,202



5.5
%Loss on debt extinguishment


(3,330
)






3,330



n/m      39




---



##### Table of Contents



Results
    of Operations  Discontinued Operations
        
    On April 17, 2008, we sold the Holiday Inn, a 158 room
    hotel located in Frederick, MD.
    On May 13, 2008, we sold the former Holiday Inn, a 156 room
    hotel located in St. Paul, MN.
    On August 14, 2008, we sold the former Holiday Inn, a 193
    room hotel located in Marietta, GA.
    On October 9, 2008, we sold the Holiday Inn, a 127 room
    hotel located in Glen Burnie, MD.
    On December 16, 2008, we sold the Holiday Inn, a 217 room
    hotel located in Frisco, CO.    
    On January 15, 2007, we sold the University Plaza, a 186
    room hotel located in Bloomington, IN.
    On March 9, 2007, we sold the Holiday Inn, a 130 room hotel
    located in Hamburg, NY.
    On June 13, 2007, we sold the following 16 hotels:  
    Holiday Inn, a 202 room hotel located in Sheffield, AL
    Clarion, a 393 room hotel located in Louisville, KY
    Crowne Plaza, a 275 room hotel located in Cedar Rapids, IA
    Augusta West Inn, a 117 room hotel located in Augusta, GA
    Holiday Inn, a 201 room hotel located in Greentree, PA
    Holiday Inn, a 189 room hotel located in Lancaster East, PA
    Holiday Inn, a 244 room hotel located in Lansing, MI
    Holiday Inn, a 152 room hotel located in Pensacola, FL
    Holiday Inn, a 228 room hotel located in Winter Haven, FL 40




---



##### Table of Contents




    Holiday Inn, a 100 room hotel located in York, PA
    Holiday Inn Express, a 112 room hotel located in Dothan, AL
    Holiday Inn Express, a 122 room hotel located in Pensacola, FL
    Park Inn, a 126 room hotel located in Brunswick, GA
    Quality Inn, a 102 room hotel located in Dothan, AL
    Ramada Plaza, a 297 room hotel located in Macon, GA
    Ramada Inn, a 197 room hotel located in North Charleston, SC  
    On July 12, 2007, we sold the Holiday Inn, a 159 room hotel
    located in Clarksburg, WV.
    On July 20, 2007, we sold the Holiday Inn, a 208 room hotel
    located in Fort Wayne, IN.
    On August 14, 2007, we sold the Holiday Inn, a 106 room
    hotel located in Fairmont, WV.
    On December 18, 2007, we sold the Holiday Inn, a 146 room
    hotel located in Jamestown, NY.
    On December 27, 2007, we sold the Vermont Maple Inn, a 117
    room hotel located in Burlington, VT.      2008


2007


2006($ in thousands)Total revenues

$
31,199


$
75,592


$
124,136Total expenses


(29,330
)


(68,632
)


(114,698
)Impairment of long-lived assets


(10,752
)


(9,911
)


(23,248
)Business interruption proceeds


672



571



1,590Interest income and other


29



71



59Interest expense


(1,639
)


(4,526
)


(9,233
)Casualty gains, net


5,583



2,658



143Gain on asset disposition


6,144



3,956



2,961Loss on extinguishment of debt


(948
)


(1,828
)


10,231Provision for income taxes


(31
)


(816
)


3,321(Loss) income from discontinued operations

$
927


$
(2,865
)

$
(4,738
)       
    $6.7 million on the Holiday Inn Select in Windsor, Ontario,
    Canada to reflect the current estimated selling price, net of
    selling costs;
    $1.9 million on the Hilton Northfield, MI to reflect the
    current estimated selling price, net of selling costs; 41




---



##### Table of Contents




    $1.7 million on the Holiday Inn East Hartford, CT to
    reflect the current estimated selling price, net of selling
    costs;
    $0.2 million on the closed French Quarter Suites Memphis,
    TN to reflect the current estimated selling price, net of
    selling costs;
    $0.1 million on the former Holiday Inn St. Paul, MN to
    record the final disposition of the hotel; and
    $0.1 million to record the final disposition of the Holiday
    Inn Frederick, MD as well as the disposal of replaced assets at
    various hotels;    
    $3.3 million on the Hilton Northfield, MI to reflect the
    estimated selling price;
    $1.6 million on the Holiday Inn Select in Windsor, Ontario,
    Canada to reflect the estimated selling price;
    $1.8 million on the Holiday Inn Frederick, MD to reflect
    the estimated selling price less costs to sell;
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect
    the estimated selling price less costs to sell and to record the
    final disposition of the hotel;
    $0.8 million on the Vermont Maple Inn Colchester, VT to
    reflect the estimated selling price less costs to sell and to
    record the final disposition of the hotel;
    $0.6 million on the Holiday Inn Jamestown, NY to reflect
    the estimated selling price less costs to sell and to record the
    final disposition of the hotel;
    $0.1 million on the University Plaza Bloomington, IN to
    record the final disposition of the hotel, and
    $0.4 million to record the disposal of replaced assets at
    various hotels.    
    $3.9 million on the Holiday Inn Manhattan, KS to record the
    loss on disposal of fixed assets;
    $2.2 million on the Holiday Inn Lawrence, KS to record the
    loss on disposal of fixed assets;
    $1.4 million on the Holiday Inn Sheffield, AL which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.3 million on the Holiday Inn McKnight, PA to reflect the
    lowered estimated selling price less, the write-off of capital
    improvements spent on this hotel for franchisor compliance that
    did not add incremental value or revenue generating capacity to
    the property, and the final disposition of the hotel;
    $0.1 million on the Holiday Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel;
    $0.1 million on the Azalea Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel;
    $0.7 million on the University Plaza Bloomington, IN, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.3 million on the Ramada Plaza Macon, GA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less cost to sell;
    $2.1 million on the Holiday Inn University Mall, FL, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.8 million on the Holiday Inn Express Pensacola, FL,
    which was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell; 42




---



##### Table of Contents




    $0.8 million on the Holiday Inn Greentree, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.2 million on the Holiday Inn York, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.9 million on the Holiday Inn Lancaster, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $6.4 million on the Holiday Inn Lansing, MI, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.6 million on the Holiday Inn Clarksburg, WV, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.1 million on the Holiday Inn Jekyll Island, GA to record
    the disposal costs of furniture, fixtures and equipment incurred
    during the closing of the hotel; and
    $0.3 million to record the disposal of replaced assets at
    various hotels.    Income
    Taxes
    true-ups,
  SOP 90-7
 43




---



##### Table of Contents



44




---



##### Table of Contents



Quarterly
    Results of Operations
  Forms 10-Q
  2008


2007Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter(Unaudited in thousands)Revenues:Rooms

$
38,732


$
46,679


$
49,364


$
43,848


$
40,730


$
46,942


$
49,224


$
42,821Food and beverage


13,532



12,545



15,404



12,062



14,429



12,857



15,323



12,480Other


1,886



2,176



2,138



2,062



1,819



2,134



2,131



1,668Total revenues


54,150



61,400



66,906



57,972



56,978



61,933



66,678



56,969Direct operating expenses:Rooms


11,026



12,200



12,179



11,183



10,497



11,997



11,725



10,614Food and beverage


9,015



9,070



9,851



8,819



9,054



9,432



9,918



8,835Other


1,333



1,548



1,537



1,388



1,288



1,512



1,462



1,242Total direct operating expenses


21,374



22,818



23,567



21,390



20,839



22,941



23,105



20,69132,776



38,582



43,339



36,582



36,139



38,992



43,573



36,278Other operating expenses:Other hotel operating costs


16,075



18,287



17,719



17,879



16,285



17,847



17,603



16,889Property and other taxes, insurance and leases


4,223



4,226



3,760



4,352



4,334



4,087



4,418



4,824Corporate and other


3,063



4,373



3,484



5,885



4,248



5,575



5,906



5,663Casualty losses (gain), net


1,152



(57
)






















(1,867
)Restructuring


















(25
)


1,258







Depreciation and amortization


8,352



8,120



7,989



7,469



7,464



7,226



7,098



6,977Impairment of long-lived assets


354



1,393



5,580



2,141



796



512



155



159Other operating expenses


33,219



36,342



38,532



37,726



33,102



36,505



35,180



32,645Operating (loss) income


(443
)


2,240



4,807



(1,144
)


3,037



2,487



8,393



3,633Other income (expenses):Business interruption insurance proceeds






























Interest income and other


147



241



276



390



912



1,312



807



912Other interest expense


(4,577
)


(4,821
)


(4,775
)


(5,172
)


(5,790
)


(5,958
)


(6,044
)


(5,378
)Loss on debt extinguishment


























(3,330
)


(Loss) income before income taxes and minority interests


(4,873
)


(2,340
)


308



(5,926
)


(1,841
)


(2,159
)


(174
)


(833
)Minority interests (net of taxes, nil)


























(56
)


(365
)(Loss) income before income taxes  continuing
    operations


(4,873
)


(2,340
)


308



(5,926
)


(1,841
)


(2,159
)


(230
)


(1,198
)Benefit (provision) for income taxes  continuing
    operations


(74
)


81



(24
)


(63
)


(2,262
)


1,027



372



707(Loss) income from continuing operations


(4,947
)


(2,259
)


284



(5,989
)


(4,103
)


(1,132
)


142



(491
) 45




---



##### Table of Contents



2008


2007Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter(unaudited in thousands)Discontinued operations:Income (loss) from discontinued operations before income taxes


199



(3,870
)


5,986



(1,357
)


(5,824
)


1,818



(248
)


2,209Benefit (provision) for income taxes


98



(54
)


97



(172
)


1,854



(639
)


(157
)


(1,875
)Income (loss) from discontinued operations


297



(3,924
)


6,083



(1,529
)


(3,970
)


1,179



(405
)


334Net (loss) income

$
(4,650
)

$
(6,183
)

$
6,367


$
(7,518
)

$
(8,073
)

$
47


$
(263
)

$
(157
)Net (loss) income from continuing operationsBasic

$
(0.23
)

$
(0.11
)

$
0.01


$
(0.26
)

$
(0.17
)

$
(0.05
)

$
0.01


$
(0.02
)Diluted

$
(0.23
)

$
(0.11
)

$
0.01


$
(0.26
)

$
(0.17
)

$
(0.05
)

$
0.01


$
(0.02
)     Liquidity
    and Capital Resources
  Working
    Capital
         46




---



##### Table of Contents



47




---



##### Table of Contents



Cash
    Flow
    Operating
    activities
    Investing
    activities
   48




---



##### Table of Contents



Financing
    activities
    and/or
   49




---



##### Table of Contents



Debt and
    contractual obligations
    Debt Obligations


MaturitiesDecember 31, 2008


2009


2010


2011


2012


2013


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

$
128,387


$
128,387


$



$



$



$



$
Goldman Sachs(2)


130,000







130,000















Wachovia


34,734



740



3,633



30,361











IXIS(3)


39,507



534



38,973















Total  Mortgage Debt


332,628



129,661



172,606



30,361











Other Long-term Liabilities(4) :Tax Notes Issued Pursuant to our Joint Plan of Reorganization


42



42



















Other Long-term Liabilities


1,342



228



206



172



153



125



4581,384



270



206



172



153



125



458Total Debt Obligations


334,012



129,931



172,812



30,533



153



125



458Less: Debt Obligations  Held for Sale


14,257



4,976



218



9,063











Total Debt Obligations  Held for Use

$
319,755


$
124,955


$
172,594


$
21,470


$
153


$
125


$
458OTHER OBLIGATIONSInterest Expense(5)


19,244


$
13,842


$
5,134


$
268


$



$



$
Ground, Parking and Other Lease Obligations


83,745



3,519



3,546



3,166



3,038



2,810



67,666Total Other Obligations


102,989



17,361



8,680



3,434



3,038



2,810



67,666Less: Other Obligations  Held for Sale


4,733



938



746



232



185



185



2,447Total Other Obligations  Held for Use

$
98,256


$
16,423


$
7,934


$
3,202


$
2,853


$
2,625


$
65,219TOTAL OBLIGATIONSTotal Debt and Other Obligations


437,001



147,292



181,492



33,967



3,191



2,935



68,124Less: Debt and Other Obligations  Held for Sale


18,990



5,914



964



9,295



185



185



2,447Total Debt and Other Obligations  Held for Use

$
418,011


$
141,378


$
180,528


$
24,672


$
3,006


$
2,750


$
65,677     (1)
    
    Discussed in Note 9 in the notes to our consolidated
    financial statements.(2)
    
    As discussed in Note 9 in the notes to our consolidated
    financial statements, the Goldman Sachs loan matures in 2009,
    with the option to extend the loan for three additional one-year
    periods. Management has the intent and ability to exercise the
    first extension option, which will extend the maturity to 2010.
    Two further one-year extension options remain.(3)
    
    As discussed in Note 9 in the notes to our consolidated
    financial statements, one IXIS loan matured in December 2007.
    The Company exercised the first and second one-year extension
    options, which extended the maturity to December 2009. The table
    assumes the remaining extension option will be exercised, which
    will extend the maturity to December 2010. The second IXIS loan
    matured in March 2008. As of December 31, 2008, the Company
    had exercised the first of three one-year extension options,
    which extended the maturity to March 2009. The table assumes the
    second extension option (which was subsequently exercised in
    March 2009) will be exercised, which will extend the
    maturity to March 2010. One further one-year extension option
    remains.(4)
    
    Comprised of unsecured notes payable of $42,000 for pre-petition
    bankruptcy related tax obligations and $1.3 million of
    other obligations.(5)
    
    The computation of interest expense related to our variable rate
    debt assumes a LIBOR of 4.60% for all future periods. 50




---



##### Table of Contents



Debt and
    Contractual Obligations
    24-month
      24-month
 51




---



##### Table of Contents



52




---



##### Table of Contents



Summary
    of Long-term Debt
    December 31, 2008


December 31, 2007Number


Property, Plant


Long-Term


Long-Term


Interest Rates at December 31,of Hotels


and Equipment, Net


Obligations


Obligations


2008($ in thousands)Mortgage DebtGoldman Sachs


10


$
120,362


$
130,000


$
130,000


LIBOR plus 1.50%; capped at 8.50%Merrill Lynch Mortgage Lending, Inc. Fixed Pool 1


4



68,490



39,372



45,986


6.58%Merrill Lynch Mortgage Lending, Inc. Fixed Pool 3


7



81,064



53,031



61,686


6.58%Merrill Lynch Mortgage Lending, Inc. Fixed Pool 4


6



84,680



35,984



46,268


6.58%IXIS


3



19,635



20,977



21,276


LIBOR plus 2.95%; capped at 8.45%IXIS


1



16,392



18,530



18,765


LIBOR plus 2.90%; capped at 7.90%Wachovia


1



12,423



16,501



16,826


6.04%Wachovia


1



7,705



9,478



9,666


6.03%Wachovia


1



5,718



5,767



5,880


6.04%Wachovia


1



5,909



2,988



3,053


5.78%Total


35



422,378



332,628



359,406


4.71% (1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan of Reorganization










42



633Other










1,342



781







1,384



1,414Property, plant and equipment 
    Unencumbered


6



56,339







41



478,717



334,012



360,820Held for sale


(6
)


(31,351
)


(14,257
)


Held for use(2)


35


$
447,366


$
319,755


$
360,820     (1)
    
    The rate represents the annual effective weighted average cost
    of debt at December 31, 2008.(2)
    
    Long-term debt obligations at December 31, 2008 and
    December 31, 2007 include the current portion of
    $125.0 million and $5.1 million, respectively.  Franchise
    Agreements and Capital Expenditures
     53




---



##### Table of Contents



2008


2007


2006($ in thousands)Continuing operations

$
17,145


$
16,967


$
15,879Discontinued operations


2,441



5,669



9,664$
19,586


$
22,636


$
25,543           Off
    Balance Sheet Arrangements
    New
    Accounting Pronouncements
  FAS 157-2,
 54




---



##### Table of Contents



No. EITF 03-6-1 EITF 03-6-1) EITF 03-6-1 EITF 03-6-1
  No. FAS 133-1 FIN 45-4 No. FAS 133-1)
 55




---



##### Table of Contents



No. FAS 133-1 No. FAS 133-1
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    24-month
  12-month
  24-month
       56




---



##### Table of Contents



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




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework Managements Report on Internal Control over Financial
    Reporting
        Internal Control  Integrated Framework
       58




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  (a)
    (1) Our Consolidated Financial Statements are filed as a
    separate section of this report commencing on
    page F-1:         59




---



##### Table of Contents



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

TITLE/s/  Peter
    T. CyrusPeter
    T. Cyrus

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

Executive Vice President and Chief Financial Officer
    (Principal Accounting Officer)/s/  Stewart
    J. BrownStewart
    J. Brown

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

Director/s/  John
    W. AllisonJohn
    W. Allison

Director/s/  Paul
    J. GarityPaul
    J. Garity

Director/s/  Michael
    J. GrondahlMichael
    J. Grondahl

Director/s/  Alex
    R. LieblongAlex
    R. Lieblong

Director/s/  Mark
    S. OeiMark
    S. Oei

Director  60




---



##### 



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


F-2Consolidated Balance Sheets as of
    December 31, 2008 and December 31, 2007


F-3Consolidated Statements of Operations for the
    Years Ended December 31, 2008, December 31, 2007 and
    December 31, 2006


F-4Consolidated Statements of Stockholders
    Equity for the Years Ended December 31, 2008,
    December 31, 2007 and December 31, 2006


F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2008, December 31, 2007 and
    December 31, 2006


F-6Notes to the Consolidated Financial Statements


F-7     F-1




---



##### Table of Contents



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




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS  December 31, 2008


December 31, 2007($ in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
20,454


$
54,389Cash, restricted


8,179



8,363Accounts receivable (net of allowances: 2008  $263;
    2007 - $323)


7,115



8,794Insurance receivable






2,254Inventories


2,983



3,097Prepaid expenses and other current assets


21,257



18,186Assets held for sale


33,021



8,009Total current assets


93,009



103,092Property and equipment, net


447,366



499,986Deposits for capital expenditures


11,408



16,565Other assets


3,631



5,087$
555,414


$
624,730LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
7,897


$
9,692Other accrued liabilities


22,897



28,336Advance deposits


1,293



1,683Insurance advances






2,650Current portion of long-term liabilities


124,955



5,092Liabilities related to assets held for sale


16,167



961Total current liabilities


173,209



48,414Long-term liabilities


194,800



355,728Total liabilities


368,009



404,142Commitments and contingencies (Note 13)Stockholders equity:Common stock, $.01 par value, 60,000,000 shares
    authorized;25,075,837 and 25,008,621 issued at December 31, 2008 and
    December 31, 2007, respectively


251



250Additional paid-in capital


330,785



329,694Accumulated deficit


(105,246
)


(93,262
)Accumulated other comprehensive income


1,262



4,115Treasury stock, at cost, 3,806,000 and 1,709,878 shares atDecember 31, 2008 and December 31, 2007, respectively


(39,647
)


(20,209
)Total stockholders equity


187,405



220,588$
555,414


$
624,730    F-3




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF OPERATIONS  For the Years Ended December 31,2008


2007


2006($ in thousands, except per share data)Revenues:Rooms

$
178,623


$
179,716


$
170,764Food and beverage


53,543



55,089



49,807Other


8,262



7,753



7,064Total revenues


240,428



242,558



227,635Direct operating expenses:Rooms


46,588



44,833



43,329Food and beverage


36,755



37,239



34,861Other


5,806



5,503



5,402Total direct operating expenses


89,149



87,575



83,592151,279



154,983



144,043Other operating expenses:Other hotel operating costs


69,960



68,623



63,467Property and other taxes, insurance, and leases


16,561



17,662



17,383Corporate and other


16,805



21,391



20,693Casualty losses (gains), net


1,095



(1,867
)


(2,985
)Restructuring






1,232



Depreciation and amortization


31,930



28,765



27,414Impairment of long-lived assets


9,468



1,622



632Total other operating expenses


145,819



137,428



126,604Operating income


5,460



17,555



17,439Other income (expenses):Business interruption proceeds










3,094Interest income and other


1,054



3,944



2,558Interest expense


(19,345
)


(23,172
)


(21,970
)Loss on debt extinguishment






(3,330
)


(Loss) income before income taxes and minority interests


(12,831
)


(5,003
)


1,121Minority interests (net of taxes, nil)






(421
)


295Provision for income taxes  continuing operations


(80
)


(157
)


(11,854
)Loss from continuing operations


(12,911
)


(5,581
)


(10,438
)Discontinued operations:Income (loss) from discontinued operations before income taxes


958



(2,049
)


(8,059
)(Provision) benefit for income taxes  discontinued
    operations


(31
)


(816
)


3,321Income (loss) from discontinued operations


927



(2,865
)


(4,738
)Net loss

$
(11,984
)

$
(8,446
)

$
(15,176
)Basic net loss per share

$
(0.55
)

$
(0.35
)

$
(0.62
)Diluted net loss per share

$
(0.55
)

$
(0.35
)

$
(0.62
)    F-4




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  AccumulatedAdditional


Unearned





Other








TotalCommon Stock


Paid-In


Stock


Accumulated


Comprehensive


Treasury Stock


StockholdersShares


Amount


Capital


Compensation


Deficit


Income


Shares


Amount


Equity (Deficit)($ in thousands, except share data)Balance December 31, 2005


24,648,405


$
246


$
317,034


$
(604
)

$
(69,640
)

$
2,234



21,633


$
(226
)

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










(604
)


604



















Amortization of unearned stock compensation










1,406























1,406Issuance and vesting of restricted and nonvested shares


49,913



3



159























162Exercise of stock options


162,003







1,673























1,673Repurchases of treasury stock


























229,986



(2,815
)


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










67























67Realization of pre-emergence deferred tax asset










7,899























7,899Comprehensive loss:Net loss


















(15,176
)














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






















(146
)










(146
)Total comprehensive loss


































(15,322
)Balance December 31, 2006


24,860,321


$
249


$
327,634


$



$
(84,816
)

$
2,088



251,619


$
(3,041
)

$
242,114Amortization of unearned stock compensation










1,387























1,387Issuance and vesting of nonvested shares


85,587



1



(1
)






















Exercise of stock options


64,086







621























621Repurchases of treasury stock


























1,458,259



(17,168
)


(17,168
)Other


(1,373
)






53























53Comprehensive loss:Net loss


















(8,446
)














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






















2,027











2,027Total comprehensive loss


































(6,419
)Balance, December 31, 2007


25,008,621


$
250


$
329,694


$



$
(93,262
)

$
4,115



1,709,878


$
(20,209
)

$
220,588Amortization of unearned stock compensation










1,069























1,069Issuance and vesting of nonvested shares


64,882



1



(1
)






















Exercise of stock options


2,334







23























23Repurchases of treasury stock


























2,096,122



(19,438
)


(19,438
)Comprehensive loss:Net loss


















(11,984
)














(11,984
)Currency translation adjustments (related taxes estimated at nil)






















(2,853
)










(2,853
)Total comprehensive loss


































(14,837
)Balance, December 31, 2008


25,075,837


$
251


$
330,785


$



$
(105,246
)


1,262


$
3,806,000


$
(39,647
)

$
187,405    F-5




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  For the Years Ended December 31,2008


2007


2006($ in thousands)Operating activities:Net loss

$
(11,984
)

$
(8,446
)

$
(15,176
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization


31,950



32,145



36,227Impairment of long-lived assets


20,220



11,533



23,880Stock compensation expense


1,069



1,387



1,566Casualty gain, net


(4,488
)


(4,525
)


(3,128
)Deferred income taxes










7,968Minority interests






421



(295
)Gain on asset dispositions


(6,144
)


(3,956
)


(2,961
)Loss (gain) on extinguishment of debt


948



5,158



(10,231
)Amortization of deferred financing costs


1,493



1,431



1,384Other










78Changes in operating assets and liabilities:Accounts receivable, net of allowances


1,037



119



(581
)Insurance receivable






1,230



1,696Inventories


(322
)


(152
)


(371
)Prepaid expenses and other assets


(788
)


6,491



(4,331
)Accounts payable


(862
)


(4,169
)


(575
)Other accrued liabilities


(4,454
)


(2,037
)


565Advance deposits


(252
)


262



(122
)Net cash provided by operating activities


27,423



36,892



35,593Investing activities:Capital improvements


(47,184
)


(41,520
)


(35,787
)Proceeds from sale of assets, net of related selling costs


24,106



77,961



22,925Acquisition of minority partners interest






(16,361
)


Withdrawals for capital expenditures


5,157



4,926



9,371Insurance proceeds related to casualty claims, net


4,092



63



3,194Net decrease in restricted cash


184



5,428



1,212Other


72



38



(159
)Net cash (used in) provided by investing activities


(13,573
)


30,535



756Financing activities:Proceeds from issuance of long term debt






130,000



44,954Proceeds from exercise of stock options


23



621



1,673Principal payments on long-term debt


(26,808
)


(169,424
)


(49,767
)Purchases of treasury stock


(19,907
)


(16,818
)


(2,696
)Payments of deferred financing costs


(12
)


(1,666
)


(870
)Payments of defeasance costs


(848
)


(4,206
)


(546
)Other






(16
)


10Net cash used in financing activities


(47,552
)


(61,509
)


(7,242
)Effect of exchange rate changes on cash


(233
)


283



(16
)Net (decrease) increase in cash and cash equivalents


(33,935
)


6,201



29,091Cash and cash equivalents at beginning of year


54,389



48,188



19,097Cash and cash equivalents at end of year

$
20,454


$
54,389


$
48,188Supplemental cash flow information:Cash paid during the year for:Interest, net of the amounts capitalized shown below

$
20,147


$
26,504


$
32,734Interest capitalized


323



443



117Income taxes, net of refunds


516



1,485



845Supplemental disclosure of non-cash investing and financing
    activities:Net non-cash debt decrease










10,250Treasury stock repurchases traded, but not settled






469



119Purchases of property and equipment on account


6,156



6,276



1,923    F-6




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 December 31,
    2008
  1.
    Summary
    of Significant Accounting Policies  Description
    of Business
    
    40 hotels that are wholly owned and operated through
    subsidiaries; and
    one hotel that is operated in a joint venture in the form of a
    limited partnership, in which a Lodgian subsidiary serves as the
    general partner, has a 51% voting interest and exercises control.    Principles
    of Consolidation
      Basis
    of Presentation
   F-7




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Inventories
      Minority
    Interests
    Property
    and Equipment
       F-8




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Assets
    Held for Sale and Discontinued Operations
                  Cash
    and Cash Equivalents
    Restricted
    Cash
    Fair
    Values of Financial Instruments
      Concentration
    of Credit Risk
   F-9




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Concentration
    of Market Risk
    Income
    Taxes
    Earnings
    per Common and Common Equivalent Share
    Stock-Based
    Compensation
          Revenue
    Recognition
   F-10




---



##### 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
  FAS 157-2,
   F-11




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          No. EITF 03-6-1 EITF 03-6-1) EITF 03-6-1 EITF 03-6-1
  No. FAS 133-1 FIN 45-4 No. FAS 133-1)
 F-12




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  No. FAS 133-1 No. FAS 133-1
  2.
    Stock-Based
    Compensation      Issued Underthe StockIncentive PlanAvailable under the plan, less previously issued as of
    December 31, 2007


2,536,666Nonvested stock issued January 22, 2008


(76,500
)Nonvested stock issued February 12, 2008


(24,000
)Shares of nonvested stock withheld from awards to satisfy tax
    withholding obligations


11,257Nonvested shares forfeited in 2008


17,335Stock options forfeited in 2008


35,163Available for issuance, December 31, 2008


2,499,921   Stock
    Options
   F-13




---



##### Table of Contents



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


Exercise PriceBalance, December 31, 2005


593,894


$
10.41Exercised


(162,003
)


10.12Forfeited


(75,578
)


10.18Balance, December 31, 2006


356,313


$
10.60Exercised


(64,086
)


9.69Forfeited


(79,819
)


11.35Balance, December 31, 2007


212,408


$
10.60Exercised


(2,334
)


9.68Forfeited


(35,163
)


10.32Balance, December 31, 2008


174,911


$
10.66       Options Outstanding and ExercisableWeighted Average


WeightedRemaining Life


AverageRange of Prices

Number


(In Years)


Exercise Price$7.83 to $9.39


73,663



6.4


$
9.05$9.40 to $10.96


72,587



5.6


$
10.51$10.97 to $15.66


28,661



4.7


$
15.21174,911



5.8


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

$
Aggregate intrinsic value of stock options exercisable

$
   Restricted
    Stock
     F-14




---



##### Table of Contents



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


Exercise PriceBalance, December 31, 2005






Granted


12,413


$
12.88Withheld to satisfy tax obligations


(4,719
)


12.88Balance, December 31, 2006


7,694


$
12.88Expiration of restrictions


(7,694
)


12.88Balance, December 31, 2007





$
     Nonvested
    Stock
               F-15




---



##### Table of Contents



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


Fair ValueBalance, December 31, 2005


75,000


$
10.44Granted


45,884



12.63Forfeited


(777
)


12.88Vested


(37,500
)


10.44Balance, December 31, 2006


82,607


$
11.63Granted


127,800



12.96Forfeited


(9,629
)


13.32Vested


(85,587
)


11.72Balance, December 31, 2007


115,191


$
12.89Granted


100,500



8.85Forfeited


(17,335
)


9.94Vested


(64,882
)


12.52Balance, December 31, 2008


133,474


$
10.41       Unrecognized


Weighted-AverageCompensation


AmortizationType of Award

Expense ($000s)


Period (in years)($ in thousands)Nonvested Stock

$
686



1.26Revised Plan Nonvested Stock Awards


492



2.21Total

$
1,178



1.71     Year Ended December 31, 2008


Year Ended December 31, 2007


Year Ended December 31, 2006Compensation


Income Tax


Compensation


Income Tax


Compensation


Income TaxType of Award

Expense


(Expense) Benefit


Expense


Benefit


Expense


Benefit($ in thousands)Stock Options

$
(51
)

$
(20
)

$
174


$
68


$
908


$
352Nonvested Stock


963



374



1,213



471



498



193Restricted Stock


















160



62Revised Plan Nonvested Stock Awards


157



61















Total

$
1,069


$
415


$
1,387


$
539


$
1,566


$
607  F-16




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  3.
    Discontinued
    Operations  Dispositions
    
    On March 9, 2006, the Company sold the Fairfield Inn, a 105
    room hotel located in Jackson, TN.
    On April 3, 2006, the Company sold a land parcel located in
    Mt. Laurel, NJ.
    On April 25, 2006, the Company sold the Holiday Inn, a 146
    room hotel located in Pittsburgh, PA.
    On October 24, 2006, the Company sold the Holiday Inn, a
    167 room hotel located in Valdosta, GA.
    On October 24, 2006, the Company sold the Azalea Inn, a 108
    room hotel located in Valdosta, GA.
    On November 28, 2006, the Company sold its rights to the
    ground lease of the former Holiday Inn located in Jekyll Island,
    GA.
    On December 1, 2006, the Company sold the Quality Inn, a
    205 room hotel located in Metairie, LA.      
    On January 15, 2007, the Company sold the University Plaza,
    a 186 room hotel located in Bloomington, IN.
    On March 9, 2007, the Company sold the Holiday Inn, a 130
    room hotel located in Hamburg, NY.
    On June 13, 2007, the Company sold the following 16 hotels:  
    Holiday Inn, a 202 room hotel located in Sheffield, AL
    Clarion, a 393 room hotel located in Louisville, KY
    Crowne Plaza, a 275 room hotel located in Cedar Rapids, IA
    Augusta West Inn, a 117 room hotel located in Augusta, GA
    Holiday Inn, a 201 room hotel located in Greentree, PA
    Holiday Inn, a 189 room hotel located in Lancaster East, PA
    Holiday Inn, a 244 room hotel located in Lansing, MI
    Holiday Inn, a 152 room hotel located in Pensacola, FL
    Holiday Inn, a 228 room hotel located in Winter Haven, FL
    Holiday Inn, a 100 room hotel located in York, PA
    Holiday Inn Express, a 112 room hotel located in Dothan, AL
    Holiday Inn Express, a 122 room hotel located in Pensacola, FL
    Park Inn, a 126 room hotel located in Brunswick, GA F-17




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   
    Quality Inn, a 102 room hotel located in Dothan, AL
    Ramada Plaza, a 297 room hotel located in Macon, GA
    Ramada Inn, a 197 room hotel located in North Charleston, SC
    On July 12, 2007, the Company sold the Holiday Inn, a 159
    room hotel located in Clarksburg, WV.  
    On July 20, 2007, the Company sold the Holiday Inn, a 208
    room hotel located in Fort Wayne, IN.
    On August 14, 2007, the Company sold the Holiday Inn, a 106
    room hotel located in Fairmont, WV.
    On December 18, 2007, the Company sold the Holiday Inn, a
    146 room hotel located in Jamestown, NY.
    On December 27, 2007, the Company sold the Vermont Maple
    Inn, a 117 room hotel located in Burlington, VT.      
    On April 17, 2008, the Company sold the Holiday Inn, a 158
    room hotel located in Frederick, MD.
    On May 13, 2008, the Company sold the former Holiday Inn, a
    156 room hotel located in St. Paul, MN.
    On August 14, 2008, the Company sold the Holiday Inn, a 193
    room hotel located in Marietta, GA
    On October 9, 2008, the Company sold the Holiday Inn, a 127
    room hotel located in Glen Burnie, MD
    On December 16, 2008, the Company sold the Holiday Inn, a
    217 room hotel located in Frisco, CO    Assets
    Held for Sale and Discontinued Operations
     F-18




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    
    $6.7 million on the Holiday Inn Select in Windsor, Ontario,
    Canada to reflect the current estimated selling price, net of
    selling costs;
    $1.9 million on the Hilton Northfield, MI to reflect the
    current estimated selling price, net of selling costs;
    $1.7 million on the Holiday Inn East Hartford, CT to
    reflect the current estimated selling price, net of selling
    costs;
    $0.2 million on the closed French Quarter Suites Memphis,
    TN to reflect the current estimated selling price, net of
    selling costs;
    $0.1 million on the former Holiday Inn St. Paul, MN to
    record the final disposition of the hotel; and
    $0.1 million to record the final disposition of the Holiday
    Inn Frederick, MD as well as the disposal of replaced assets at
    various hotels;    
    $3.3 million on the Hilton Northfield, MI to reflect the
    estimated selling price;
    $1.6 million on the Holiday Inn Select in Windsor, Ontario,
    Canada to reflect the estimated selling price;
    $1.8 million on the Holiday Inn Frederick, MD to reflect
    the estimated selling price;
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect
    the estimated selling price less costs to sell, and to record
    the final disposition of the hotel;
    $0.8 million on the Vermont Maple Inn Colchester, VT to
    reflect the estimated selling price less costs to sell, and to
    record the final disposition of the hotel;
    $0.6 million on the Holiday Inn Jamestown, NY to reflect
    the estimated selling price less costs to sell, and to record
    the final disposition of the hotel;
    $0.1 million on the University Plaza Bloomington, IN to
    record the final disposition of the hotel; and
    $0.4 million to record the disposal of replaced assets at
    various hotels.    
    $3.9 million on the Holiday Inn Manhattan, KS to record the
    loss on disposal of fixed assets;
    $2.2 million on the Holiday Inn Lawrence, KS to record the
    loss on disposal of fixed assets;
    $1.4 million on the Holiday Inn Sheffield, AL which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.3 million on the Holiday Inn McKnight, PA to reflect the
    lowered estimated selling price less costs to sell, the
    write-off of capital improvements for franchisor compliance that
    did not add incremental value and the final disposition of the
    hotel;
    $0.1 million on the Holiday Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel;
    $0.1 million on the Azalea Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel; F-19




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   
    $0.7 million on the University Plaza Bloomington, IN, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.3 million on the Ramada Plaza Macon, GA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less cost to sell;
    $2.1 million on the Holiday Inn University Mall, FL, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.8 million on the Holiday Inn Express Pensacola, FL,
    which was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $0.8 million on the Holiday Inn Greentree, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.2 million on the Holiday Inn York, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.9 million on the Holiday Inn Lancaster, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $6.4 million on the Holiday Inn Lansing, MI, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.6 million on the Holiday Inn Clarksburg, WV, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.1 million on the Holiday Inn Jekyll Island, GA to record
    the disposal costs of furniture, fixtures and equipment incurred
    during the closing of the hotel; and
    $0.3 million to record the disposal of replaced assets at
    various hotels.      
    French Quarter Suites Memphis, TN
    Hilton Northfield, MI
    Holiday Inn Cromwell Bridge, MD
    Holiday Inn East Hartford, CT
    Holiday Inn Phoenix, AZ
    Holiday Inn Select Windsor, Ontario, Canada F-20




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     December 31, 2008


December 31, 2007$( in thousands)Property and equipment, net

$
31,351


$
7,781Other assets


1,670



228Assets held for sale

$
33,021


$
8,009Other liabilities

$
6,886


$
961Long-term debt


9,281



Liabilities related to assets held for sale

$
16,167


$
961     For the Years Ended December 31,2008


2007


2006($ in thousands)Total revenues

$
31,199


$
75,592


$
124,136Total expenses


(29,330
)


(68,632
)


(114,698
)Impairment of long-lived assets


(10,752
)


(9,911
)


(23,248
)Business interruption proceeds


672



571



1,590Interest income and other


29



71



59Interest expense


(1,639
)


(4,526
)


(9,233
)Casualty gains, net


5,583



2,658



143Gain on asset disposition


6,144



3,956



2,961Loss on extinguishment of debt


(948
)


(1,828
)


10,231Provision for income taxes


(31
)


(816
)


3,321(Loss) income from discontinued operations

$
927


$
(2,865
)

$
(4,738
)       4.
    Accounts
    Receivable    December 31, 2008


December 31, 2007($ in thousands)Trade accounts receivable

$
6,142


$
8,144Allowance for doubtful accounts


(263
)


(323
)Tax receivable and other


1,236



973$
7,115


$
8,794  F-21




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  5.
    Prepaid
    Expenses and Other Current Assets    December 31, 2008


December 31, 2007($ in thousands)Deposits for property taxes

$
5,220


$
4,954Prepaid insurance


2,534



3,358Lender-required insurance deposits


4,518



4,686Vendor deposits for capital purchases


5,098



1,823Deposits and other prepaid expenses


3,887



3,365$
21,257


$
18,186   6.
    Property
    and Equipment, net    Useful Lives


December 31,


December 31,(years)


2008


2007($ in thousands)Land





$
45,624


$
52,656Buildings and improvements


10  40



368,697



407,652Property and equipment


3  10



152,159



145,101China, glass and silverware






2,139



2,239568,619



607,648Less accumulated






(128,784
)


(116,266
)depreciationConstruction in progress






7,531



8,604$
447,366


$
499,986        F-22




---



##### Table of Contents



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


December 31,2008


2007($ in thousands)Deferred financing costs

$
1,268


$
2,879Deferred franchise fees


1,410



1,255Utility and other deposits


222



248Linen inventory


731



705$
3,631


$
5,087       Total


2009


2010


2011


2012


2013


After 2014($ in thousands)Deferred financing costs

$
1,268


$
990


$
276


$
2


$



$



$
Deferred franchise fees


1,410



235



176



171



163



137



528$
2,678


$
1,225


$
452


$
173


$
163


$
137


$
528   8.
    Other
    Accrued Liabilities    December 31, 2008


December 31, 2007($ in thousands)Salaries and related costs

$
3,954


$
5,780Self-insurance loss accruals


10,385



12,193Property and sales taxes


5,533



5,662Professional fees


390



818Accrued franchise fees


873



1,083Accrued interest


1,174



1,864Other


588



936$
22,897


$
28,336   9.
    Long-Term
    Liabilities     F-23




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      December 31, 2008


December 31, 2007Number


Property, Plant


Long-Term


Long-Termof Hotels


and Equipment, Net


Obligations


Obligations


Interest Rates at December 31, 2008($ in thousands)Mortgage DebtGoldman Sachs


10


$
120,362


$
130,000


$
130,000


LIBOR plus 1.50%; capped at 8.50%Merrill Lynch Mortgage Lending, Inc. Fixed Pool 1


4



68,490



39,372



45,986


6.58%Merrill Lynch Mortgage Lending, Inc. Fixed Pool 3


7



81,064



53,031



61,686


6.58%Merrill Lynch Mortgage Lending, Inc. Fixed Pool 4


6



84,680



35,984



46,268


6.58%IXIS


3



19,635



20,977



21,276


LIBOR plus 2.95%; capped at 8.45%IXIS


1



16,392



18,530



18,765


LIBOR plus 2.90%; capped at 7.90%Wachovia


1



12,423



16,501



16,826


6.04%Wachovia


1



7,705



9,478



9,666


6.03%Wachovia


1



5,718



5,767



5,880


6.04%Wachovia


1



5,909



2,988



3,053


5.78%Total


35



422,378



332,628



359,406


4.71% (1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan of Reorganization










42



633Other










1,342



781







1,384



1,414Property, plant and equipment  Unencumbered


6



56,339







41



478,717



334,012



360,820Held for sale


(6
)


(31,351
)


(14,257
)


Held for use(2)


35


$
447,366


$
319,755


$
360,820     (1)
    
    The rate represents the annual effective weighted average cost
    of debt at December 31, 2008.(2)
    
    Long-term debt obligations at December 31, 2008 and
    December 31, 2007 include the current portion of
    $125.0 million and $5.1 million, respectively. F-24




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     Mortgage
    Debt
    24-month
      24-month
 F-25




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
            Interest
    Rate Cap Agreements
     F-26




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Future
    Loan Repayment Projections
    DebtObligationsDecember 31, 2008


2009


2010


2011


2012


2013


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

$
128,387


$
128,387


$



$



$



$



$
Goldman Sachs(1)


130,000







130,000















Wachovia


34,734



740



3,633



30,361











IXIS(2)


39,507



534



38,973















Total  Mortgage Debt


332,628



129,661



172,606



30,361











Other Long-term Liabilities(3):Tax Notes Issued Pursuant to our Joint Plan of Reorganization


42



42



















Other Long-term Liabilities


1,342



228



206



172



153



125



4581,384



270



206



172



153



125



458Total Debt Obligations


334,012



129,931



172,812



30,533



153



125



458Less: Debt Obligations  
    Held for Sale


14,257



4,976



218



9,063











Total Debt Obligations  
    Held for Use

$
319,755


$
124,955


$
172,594


$
21,470


$
153


$
125


$
458     (1)
    
    As discussed in Note 9, the Goldman Sachs loan matures in
    2009, with the option to extend the loan for three additional
    one-year periods. Management has the intent and ability to
    exercise the first extension option, which will extend the
    maturity to 2010. Two further one-year extension options remain.
    The table assumes the first extension option will be exercised.(2)
    
    As discussed in Note 9, one IXIS loan matured in December
    2007. The Company exercised the first and second one-year
    extension options, which extended the maturity to December 2009.
    The table assumes the remaining extension option will be
    exercised, which will extend the maturity to December 2010. The
    second IXIS loan matured in March 2008. As of December 31,
    2008, the Company had exercised the first of three one-year
    extension options, which extended the maturity to March 2009.
    The table assumes the second extension option (which was
    subsequently exercised in March 2009) will be exercised,
    which will extend the maturity to March 2010. One further
    one-year extension option remains.(3)
    
    Comprised of unsecured notes payable of $42,000 for pre-petition
    bankruptcy related tax obligations and $1.3 million of
    other obligations.  10.
    Stockholders
    Equity  Treasury
    Stock
   F-27




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
              Class A
    and Class B Warrants
        11.
    Income
    Taxes    2008


2007Current


Deferred


Total


Current


Deferred


Total($ in thousands)Federal

$



$



$



$



$



$
State and Local


72







72



837







837Foreign


39







39



136







136$
111


$



$
111


$
973


$



$
973Less: discontinued operations


31







31



816







816$
80


$



$
80


$
157


$



$
157  F-28




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2008


2007Total


Current


Non-Current


Total


Current


Non-Current($ in thousands)Property and equipment

$
(30,323
)

$



$
(30,323
)

$
(33,958
)

$



$
(33,958
)Net operating loss carryforwards (NOLs)


86,650







86,650



84,540







84,540Legal and workers compensation


3,690



3,690







4,414



4,414



reservesAMT and FICA credit carryforwards


2,596







2,596



2,360







2,360Other operating accruals


1,163



1,163







1,604



1,604



Other


334







334



284







284Total

$
64,110


$
4,853


$
59,257


$
59,244


$
6,018


$
53,226Less valuation allowance


(64,110
)


(4,853
)


(59,257
)


(59,244
)


(6,018
)


(53,226
)$



$



$



$



$



$
     2008


2007($ in thousands)Federal income tax (benefit) charge at

$
(4,037
)

$
(2,489
)statutory federal rateState income tax (benefit) charge, net


(577
)


485Non-deductible items


182



324Foreign


39



136Change in valuation allowance


4,504



2,517$
111


$
973Less discontinued operations


31



816Provision for income taxes

$
80


$
157   true-ups,
   F-29




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
         F-30




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  12.
    Earnings
    Per Share    2008


2007


2006($ in thousands, except per share data)Numerator:Loss from continuing operations

$
(12,911
)

$
(5,581
)

$
(10,438
)Income (loss) from discontinued operations


927



(2,865
)


(4,738
)Net loss

$
(11,984
)

$
(8,446
)

$
(15,176
)Denominator:Basic weighted average shares


21,774



24,292



24,617Diluted weighted average shares


21,774



24,292



24,617Basic income (loss) per common share:Income (loss) from continuing operations

$
(0.59
)

$
(0.23
)

$
(0.42
)Income (loss) from discontinued operations


0.04



(0.12
)


(0.19
)Net loss

$
(0.55
)

$
(0.35
)

$
(0.62
)Diluted income (loss) per common share:Income (loss) from continuing operations

$
(0.59
)

$
(0.23
)

$
(0.42
)Income (loss) from discontinued operations


0.04



(0.12
)


(0.19
)Net income (loss)

$
(0.55
)

$
(0.35
)

$
(0.62
)   No. D-62,
       F-31




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   13.
    Commitments
    and Contingencies  Franchise
    Agreements and Capital Expenditures
    2008


2007


2006($ in thousands)Continuing operations

$
17,145


$
16,967


$
15,879Discontinued operations


2,441



5,669



9,664$
19,586


$
22,636


$
25,543       and/or
  
    One hotel is in default of the franchise agreements because of
    substandard guest satisfaction scores. If the Company does not
    achieve scores above the required thresholds by the designated
    cure dates, this hotel could be subject to termination of the
    franchise agreement. However, since the Company recently
    completed some renovations at the hotel, the Company anticipates
    that it will be given additional time to cure the default.
    One hotel is in default of the franchise agreement for failure
    to complete a Property Improvement Plan. If the Company does not
    cure the default by April 2009, the hotels franchise
    agreement could be terminated by the franchisor. This hotel is
    also in default the franchise agreement because of substandard
    guest satisfaction scores. If the Company does not achieve
    scores above the required thresholds by March 2009, this hotel
    could be subject to termination by the franchisor. However,
    since the hotel is currently under renovation, the Company
    anticipates that it will be given additional time to cure the
    defaults. F-32




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   
    One hotel is not incompliance with some of the terms of the
    franchise agreement because of substandard guest scores. If the
    Company does not achieve scores above the required quality
    thresholds by March 2009, this hotel could be placed in default
    by the franchisor. However, the Company has met with the
    franchisor, is following a specific action plan for improvement,
    and anticipates that it will cure the failure by the required
    cure date.
    The Company is anticipating cure letters for two hotels to be
    delivered no later than February 2010.            Letters
    of Credit
   F-33




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Self-insurance
        Casualty
    gains (losses), net and business interruption
    insurance
  ramp-up
             F-34




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        Litigation
      Operating
    Leases
    2008


2007


2006($ in thousands)Continuing operations

$
3,239


$
3,002


$
2,801Discontinuing operations


255



406



712Total operations

$
3,494


$
3,408


$
3,513     2009

$
3,5192010


3,5462011


3,1662012


3,0382013


2,8102014 and thereafter


67,666$
83,745   14.
    Employee
    Retirement Plans   F-35




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2008


2007


2006($ in thousands)Continuing operations

$
131


$
142


$
126Discontinued operations


1



13



25$
132


$
155


$
151     2008


2007


2006($ in thousands)Continuing operations

$
529


$
729


$
680Discontinued operations


36



62



11$
565


$
791


$
691   15.
    Restructuring    Beginning liability


1,258Less adjustments


(26
)Restructuring costs


1,232Less payments


(1,232
)Ending liability


   16.
    Related
    Party Transaction    17.
    Subsequent
    Events   F-36




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description3
.1

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

Amended and Restated Bylaws of Lodgian, Inc. (Incorporated by
    reference to Exhibit 3.4 to the Companys Annual Report on
    Form 10-K 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 4, 2004).4
.2

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
    on Form 10-K for the period ended December 31, 2003 (File No.
    1-14537), filed on March 9, 2004).10
.1

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

Amended and Restated Executive Employment Agreement between
    Edward J. Rohling and Lodgian, Inc., dated April 23, 2007
    (Incorporated by reference to Exhibit 10.1 to the Companys
    Current Report on Form 8-K (File No. 1-14537), filed with the
    Commission on April 26, 2007).10
.3

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 on Form
    10-Q for the period ended June 30, 2005 (File No. 1-14537),
    filed with the Commission on August 9, 2005).10
.4

Separation and Release Agreement between Edward J. Rohling and
    Lodgian, Inc. dated January 29, 2008 (Incorporated by reference
    to Exhibit 10.1 to the Companys Current Report on Form 8-K
    (File No. 1-14537), filed with the Commission on February 4,
    2008).10
.5

Amended and Restated Executive Employment Agreement between
    Lodgian, Inc. and James A. MacLennan dated March 29, 2007
    (Incorporated by reference to Exhibit 10.1 to the Companys
    Current Report on Form 8-K (File No. 1-14537), filed with
    the Commission on March 30, 2007).10
.6

Amended and Restated Separation Pay Agreement between Lodgian,
    Inc. and James McGrath dated March 29, 2007.**10
.7

Amended and Restated Separation Pay Agreement between Lodgian,
    Inc. and Joseph Kelly dated February 28, 2008.**10
.8

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
.9

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

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

Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective as
    of January 1, 2006 (Incorporated by reference to Exhibit 10.13
    to the Companys Quarterly Report on Form 10-Q for the
    period ended June 30, 2007 (File No. 1-14537), filed with the
    Commission on August 8, 2007).10
.12

Executive Employment Agreement between Donna B. Cohen and
    Lodgian, Inc. dated March 29, 2007 (Incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on Form 8-K
    (File No. 1-14537), filed with the Commission on March 30, 2007).10
.13

Form of Lodgian, Inc. Amended and Restated Executive Incentive
    Plan (Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on Form 8-K (File No. 1-14537),
    filed with the Commission on April 15, 2008).10
.14

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




---



##### Table of Contents



ExhibitNumber

Description10
.15

Form of Restricted Stock Award Agreement for Non-Employee
    Directors (Incorporated by reference to Exhibit 10.2 to the
    Companys Current Report on Form 8-K/A (File No. 1-14537),
    filed with the Commission on March 6, 2007).10
.16

Form of Indemnification Agreement between Lodgian, Inc. and its
    executive officers and directors (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 10, 2009.)21


Subsidiaries of Lodgian, Inc.**23


Consent of Independent Registered Public Accounting Firm**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.