##### Table of Contents



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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal Year Ended
    December 31, 2006oro

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

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




---



##### 



LODGIAN,
    INC.Form 10-K
    For the Year Ended December 31, 2006
    TABLE OF CONTENTS
  PagePART IItem 1.


Business

1Item 1A.


Risk
    Factors

18Item 1B.


Unresolved Staff
    Comments

29Item 2.


Properties

29Item 3.


Legal
    Proceedings

29Item 4.


Submission of
    Matters to a Vote of Security Holders

29PART IIItem 5.


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

29Item 6.


Selected Financial
    Data

34Item 7.


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

36Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk

63Item 8.


Financial
    Statements and Supplementary Data

64Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure

64Item 9A.


Controls and
    Procedures

64PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance

67Item 11.


Executive
    Compensation

67Item 12.


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

67Item 13.


Certain
    Relationships, Related Transactions and Director
    Independence

67Item 14.


Principal
    Accountant Fees and Services

67PART IVItem 15.


Exhibits, Financial
    Statement Schedules

67Signatures

68EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFOEX-32 SECTION 906, CERTIFICATION OF THE CEO AND CFO




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##### Table of Contents



PART I  Item 1.
    Business  When we use the terms Lodgian, we,
    our, and us, we mean Lodgian, Inc. and
    its subsidiaries.
  Our
    Company
    
    65 hotels that we wholly own and operate through
    subsidiaries; and
    three hotels that we operate in joint ventures in which we have
    a 50% or greater equity interest and exercise control.      Our
    Operations
  day-to-day
   1




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##### Table of Contents



Corporate
    History
       2




---



##### Table of Contents



Franchise
    Affiliations
     3




---



##### Table of Contents



Continuing


DiscontinuedOperations


Operations


TotalHotel


Room


Hotel


Room


Hotel


RoomCount


Count


Count


Count


Count


CountInterContinental Hotels Group PLC
    (IHG)Crowne Plaza


8



2,130



1



275



9



2,405Holiday Inn


13



2,375



14



2,379



27



4,754Holiday Inn Express


1



129



2



234



3



363Holiday Inn Select


3



799











3



799Total IHG


25



5,433



17



2,888



42



8,321Marriott International, Inc.Courtyard by Marriott


7



760











7



760Fairfield Inn by Marriott


1



116



1



117



2



233Marriott


1



238











1



238Residence Inn by Marriott


2



177











2



177SpringHill Suites by Marriott


1



107











1



107Total Marriott International


12



1,398



1



117



13



1,515Hilton Hotels CorporationDoubletree Club


1



190











1



190Hilton


3



587











3



587Total Hilton Hotels


4



777











4



777Choice Hotels International, Inc.Clarion










1



393



1



393Quality










1



102



1



102Total Choice Hotels










2



495



2



495Carlson CompaniesPark Inn










1



126



1



126Radisson


2



403











2



403Total Carlson Companies


2



403



1



126



3



529WyndhamRamada










1



197



1



197Ramada Plaza










1



297



1



297Total Wyndham










2



494



2



494Non-franchised hotels


1



105



1



117



2



222Total All Hotels


44



8,116



24



4,237



68



12,353      4




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##### Table of Contents




    Two hotels are not in compliance with the franchise agreements,
    although we have not received formal notices of non-compliance
    from the franchisors.  
    One hotel is expected to receive a formal notice of
    non-compliance due to substandard quality assurance evaluation
    scores. We are currently in the planning and diligence phase of
    renovation. We anticipate the planned renovation will remedy
    this instance of non-compliance.
    The other hotel, which is held for sale, is expected to receive
    an extension provided we complete certain work required by the
    franchisor. We are currently completing this work.  
    Eight hotels are in default of the franchise agreements.  
    Three of these hotels are held for sale. One hotel is in default
    of the franchise agreement for failure to complete the Property
    Improvement Plan (PIP). This hotel has not completed the
    renovation of the commercial and exterior areas, although the
    guest rooms were completely renovated in 2005. Although likely,
    we have not received a notice of default regarding the second
    hotel. We expect to receive an extension of the franchise
    agreement for the third hotel provided we complete certain work
    required by the franchisor. We are currently completing this
    work.
    One hotel is in default of the franchise agreement for failure
    to complete a PIP. We have met with the franchisor and are in
    the planning and diligence phase of renovation.
    Four hotels are in default due to substandard guest satisfaction
    scores. We received a default notice on one of these hotels in
    February 2007 and intend to address the default through
    operational improvements. We have received default notices for
    the remaining three hotels and do not anticipate curing the
    defaults by the required termination dates. However, we expect
    to receive extensions from the franchisors which we believe will
    enable us to improve these scores.  
    Three hotels (one of which is held for sale) are currently
    meeting the requirements to cure the deficiencies by their
    respective cure dates. We expect to receive a cure letter for
    one of the hotels shortly and to earn a clean slate
    letter for the remaining two hotels in August 2007 and August
    2009, respectively. 5




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##### Table of Contents



Sales and
    Marketing
        on-site on-site 35-50
 6




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##### Table of Contents



Joint
    Ventures
        Strategic
    Alternatives
    Competition
    and Seasonality
       7




---



##### Table of Contents



The
    Lodging Industry
      Chain-Scale
    Segmentation
    
    Upper Upscale (Hilton and Marriott);
    Upscale (Courtyard by Marriott, Crowne Plaza, Radisson,
    Residence Inn by Marriott, and SpringHill Suites by Marriott);
    Midscale with Food & Beverage (Clarion, Doubletree
    Club, Holiday Inn, Holiday Inn Select, Quality Inn, Ramada and
    Ramada Plaza);
    Midscale without Food & Beverage (Fairfield Inn by
    Marriott and Holiday Inn Express); and
    Economy (Park Inn)    2006Lodgian ContinuingChain-Scale Segment

Industry


Operations HotelsUpper Upscale


7.4
%


10.0
%Upscale


8.5
%


9.9
%Midscale with Food and Beverage


6.8
%


17.2
%Midscale without Food and Beverage


9.3
%


10.1
%Independent


5.7
%


4.3
%Overall Average


7.5
%


13.4
%     Smith Travel Research
    Properties
  day-to-day
 8




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##### Table of Contents



Portfolio
    Year ofRoom




Last Major Renovation orFranchisor/Hotel Name

Count


Location

ConstructionInterContinental Hotels Group
    PLC (IHG)Crowne Plaza Albany


384


Albany, NY

Planning and DiligenceCrowne Plaza Houston


291


Houston, TX

Being RenovatedCrowne Plaza Melbourne (50% owned)


270


Melbourne, FL

2006Crowne Plaza Pittsburgh


193


Pittsburgh, PA

2001Crowne Plaza Silver Spring


231


Silver Spring, MD

2005Crowne Plaza West Palm Beach (50%
    owned)


219


West Palm Beach, FL

2005Crowne Plaza Worcester


243


Worcester, MA

Planning and DiligenceCrowne Plaza Phoenix Airport


299


Phoenix, AZ

2004Holiday Inn Express Palm Desert


129


Palm Desert, CA

2003Holiday Inn Select DFW Airport


282


Dallas, TX

Planning and DiligenceHoliday Inn Select Strongsville


303


Cleveland, OH

2005Holiday Inn Select Windsor


214


Windsor, Ontario

2004Holiday Inn BWI Airport


260


Baltimore, MD

2000Holiday Inn Cromwell Bridge


139


Cromwell Bridge, MD

2000Holiday Inn East Hartford


130


East Hartford, CT

2000Holiday Inn Frisco


217


Frisco, CO

1997Holiday Inn Glen Burnie North


127


Glen Burnie, MD

2000Holiday Inn Hilton Head


202


Hilton Head, SC

2001Holiday Inn Inner Harbor


375


Baltimore, MD

Planning and DiligenceHoliday Inn Marietta(1)


193


Marietta, GA

2003Holiday Inn Meadowlands


138


Pittsburgh, PA

2005Holiday Inn Monroeville


187


Monroeville, PA

2005Holiday Inn Myrtle Beach


133


Myrtle Beach, SC

2006Holiday Inn Phoenix West


144


Phoenix, AZ

2003Holiday Inn Santa Fe


130


Santa Fe, NM

2003Continuing
    Operations  IHG (25 hotels)


5,433Crowne Plaza Cedar Rapids


275


Cedar Rapids, IA

1998Holiday Inn Express Dothan


112


Dothan, AL

2002Holiday Inn Express Pensacola
    University Mall


122


Pensacola, FL

2002Holiday Inn Arden Hills/St. Paul


156


St. Paul, MN

1995Holiday Inn Clarksburg


159


Clarksburg, WV

2006Holiday Inn Fairmont


106


Fairmont, WV

1997Holiday Inn Fort Wayne


208


Fort Wayne, IN

1995Holiday Inn Frederick


158


Frederick, MD

2000Holiday Inn Greentree


201


Pittsburgh, PA

2000 9




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##### Table of Contents



Year ofRoom




Last Major Renovation orFranchisor/Hotel Name

Count


Location

ConstructionHoliday Inn Hamburg


130


Buffalo, NY

1998Holiday Inn Jamestown


146


Jamestown, NY

1998Holiday Inn Lancaster (East)


189


Lancaster, PA

2000Holiday Inn Lansing West


244


Lansing, MI

1998Holiday Inn Sheffield


202


Sheffield, AL

2005Holiday Inn University Mall


152


Pensacola, FL

1997Holiday Inn Winter Haven


228


Winter Haven, FL

2004Holiday Inn York


100


York, PA

2000Discontinued
    Operations  IHG (17 hotels)


2,888Total IHG (42 hotels)


8,321Marriott International
    Inc.Courtyard by Marriott Abilene


99


Abilene, TX

2004Courtyard by Marriott Bentonville


90


Bentonville, AR

2004Courtyard by Marriott Buckhead


181


Atlanta, GA

Being RenovatedCourtyard by Marriott Florence


78


Florence, KY

2004Courtyard by Marriott Lafayette


90


Lafayette, LA

2004Courtyard by Marriott Paducah


100


Paducah, KY

2004Courtyard by Marriott Tulsa


122


Tulsa, OK

2004Fairfield Inn by Marriott Merrimack


116


Merrimack, NH

2002Marriott Denver Airport


238


Denver, CO

Planning and DiligenceResidence Inn by Marriott Dedham


81


Dedham, MA

2004Residence Inn by Marriott Little
    Rock


96


Little Rock, AR

2004Springhill Suites by Marriott
    Pinehurst


107


Pinehurst, NC

Planning and DiligenceContinuing
    Operations  Marriott (12 hotels)


1,398Fairfield Inn by Marriott Augusta


117


Augusta, GA

2002Discontinued
    Operations  Marriott (1 hotel)


117Total Marriott (13
    hotels)


1,515Hilton Hotels
    CorporationDoubletree Club Philadelphia


190


Philadelphia, PA

Planning and DiligenceHilton Fort Wayne


244


Fort Wayne, IN

2003Hilton Columbia


152


Columbia, MD

2003Hilton Northfield


191


Troy, MI

2003Continuing
    Operations  Hilton (4 hotels)


777Total Hilton (4
    hotels)


777Choice Hotels International,
    Inc.Clarion Hotel Louisville


393


Louisville, KY

2000 10




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##### Table of Contents



Year ofRoom




Last Major Renovation orFranchisor/Hotel Name

Count


Location

ConstructionQuality Inn Dothan


102


Dothan, AL

1996Discontinued
    Operations  Choice (2 hotels)


495Total Choice (2
    hotels)


495Carlson CompaniesRadisson New Orleans Airport Plaza
    Hotel (82% owned)


244


New Orleans, LA

2005Radisson Phoenix Hotel


159


Phoenix, AZ

2005Continuing
    Operations  Carlson (2 hotels)


403Park Inn Brunswick


126


Brunswick, GA

2005Discontinued
    Operations  Carlson (1 hotel)


126Total Carlson (3
    hotels)


529WyndhamRamada Charleston


197


Charleston, SC

2000Ramada Plaza Macon


297


Macon, GA

2005Discontinued
    Operations  Wyndham (2 hotels)


494Total Wyndham (2
    hotels)


494Non-franchised hotelsFrench Quarter Suites Memphis


105


Memphis, TN

1997Continuing
    Operations  Non-franchised (1 hotel)


105Vermont Maple Inn


117


Colchester, VT

2002Discontinued
    Operations  Non-franchised (1 hotel)


117Total non-franchised hotels (2
    hotels)


222All hotels (68
    hotels)


12,353     (1)
    
    This hotel is currently closed as a result of a fire on
    January 15, 2006.  Dispositions
    Number ofLandHotels


ParcelsOwned at December 31, 2004


86



1Sold in 2005


(8
)


Owned at December 31, 2005


78



1Surrendered to lender in 2006


(2
)


Deeded to the lender in 2006


(1
)


Sold in 2006


(6
)


(1
) 11




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##### Table of Contents



Number ofLandHotels


ParcelsOwned at December 31, 2006


69



Sold January 1, 2007 to
    March 1, 2007


(1
)


Owned at March 1, 2007


68



   Hotel
    data by market segment and region
    
    the Holiday Inn hotel in Marietta, GA is excluded because it was
    closed for most of 2006 due to a fire that occurred in January
    2006;
    the SpringHill Suites by Marriott hotel in Pinehurst, NC
    (acquired in December 2004) is excluded because we do not
    have comparative information for the year ended
    December 31, 2004;
    the Crowne Plaza Melbourne, FL hotel is excluded because it was
    closed, September through December 2004 and throughout 2005 for
    hurricane renovations; and
    the Crowne Plaza West Palm Beach, FL hotel is excluded because
    it was closed, September through December 2004 and during most
    of 2005 for hurricane renovations. 12




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##### Table of Contents



Combined
    Continuing and Discontinued Operations  65 hotels
    (excludes the Pinehurst, West Palm Beach, Melbourne and Marietta
    hotels)  2006


2005


2004Upper UpscaleNumber of properties


4



4



4Number of rooms


825



825



825Occupancy


68.3
%


69.7
%


67.3
%Average daily rate

$
113.65


$
101.39


$
96.09RevPAR

$
77.67


$
70.63


$
64.66UpscaleNumber of properties


18



19



17Number of rooms


3,256



3,553



3,078Occupancy


69.6
%


67.1
%


65.2
%Average daily rate

$
102.09


$
91.93


$
84.23RevPAR

$
71.04


$
61.69


$
54.92Midscale with Food &
    BeverageNumber of properties


34



33



35Number of rooms


6,538



6,241



6,598Occupancy


60.6
%


60.1
%


61.0
%Average daily rate

$
83.24


$
79.50


$
76.17RevPAR

$
50.40


$
47.74


$
46.48Midscale without Food &
    BeverageNumber of properties


5



6



6Number of rooms


596



713



713Occupancy


62.6
%


67.7
%


62.9
%Average daily rate

$
79.90


$
70.27


$
64.03RevPAR

$
50.00


$
47.59


$
40.29EconomyNumber of properties


1



1



Number of rooms


126



126



Occupancy


46.5
%


49.3
%


Average daily rate

$
59.05


$
62.98



RevPAR

$
27.45


$
31.02



Independent HotelsNumber of properties


3



2



3Number of rooms


408



291



535Occupancy


39.0
%


34.7
%


36.6
%Average daily rate

$
63.05


$
67.97


$
63.27RevPAR

$
24.59


$
23.58


$
23.17All HotelsNumber of properties


65



65



65Number of rooms


11,749



11,749



11,749Occupancy


62.8
%


62.6
%


61.6
%Average daily rate

$
90.56


$
84.35


$
78.83RevPAR

$
56.88


$
52.79


$
48.53  13




---



##### Table of Contents



Continuing
    Operations  40 hotels (excludes the Pinehurst, West
    Palm Beach, Melbourne and Marietta hotels, and 25 hotels held
    for sale as of December 31, 2006).  2006


2005


2004Upper UpscaleNumber of properties


4



4



4Number of rooms


825



825



825Occupancy


68.3
%


69.7
%


67.3
%Average daily rate

$
113.65


$
101.39


$
96.09RevPAR

$
77.67


$
70.63


$
64.66UpscaleNumber of properties


17



17



15Number of rooms


2,981



2,981



2,506Occupancy


69.8
%


69.4
%


67.5
%Average daily rate

$
104.54


$
95.00


$
87.34RevPAR

$
72.98


$
65.97


$
58.96Midscale with Food &
    BeverageNumber of properties


16



16



17Number of rooms


3,170



3,170



3,401Occupancy


67.1
%


62.9
%


65.6
%Average daily rate

$
95.51


$
89.73


$
85.69RevPAR

$
64.07


$
56.46


$
56.24Midscale without Food &
    BeverageNumber of properties


2



2



2Number of rooms


245



245



245Occupancy


58.6
%


62.7
%


56.3
%Average daily rate

$
87.58


$
74.35


$
72.84RevPAR

$
51.34


$
46.63


$
41.04Independent HotelsNumber of properties


1



1



2Number of rooms


105



105



349Occupancy


58.6
%


45.3
%


37.3
%Average daily rate

$
49.77


$
61.80


$
58.53RevPAR

$
29.17


$
27.98


$
21.86All HotelsNumber of properties


40



40



40Number of rooms


7,326



7,326



7,326Occupancy


67.9
%


66.1
%


64.8
%Average daily rate

$
100.55


$
92.60


$
86.37RevPAR

$
68.30


$
61.19


$
55.97  14




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##### Table of Contents



Combined
    Continuing and Discontinued Operations  65 hotels
    (excludes the Pinehurst, West Palm Beach, Melbourne and Marietta
    hotels)  2006


2005


2004Northeast RegionNumber of properties


26



26



26Number of rooms


4,768



4,768



4,768Occupancy


64.6
%


64.3
%


66.3
%Average daily rate

$
95.36


$
90.28


$
84.99RevPAR

$
61.63


$
58.10


$
56.36Southeast RegionNumber of properties


19



19



19Number of rooms


3,181



3,181



3,181Occupancy


58.3
%


59.7
%


56.1
%Average daily rate

$
85.72


$
79.09


$
71.13RevPAR

$
49.98


$
47.21


$
39.87Midwest RegionNumber of properties


13



13



13Number of rooms


2,484



2,484



2,484Occupancy


62.0
%


60.4
%


59.2
%Average daily rate

$
81.52


$
77.59


$
73.07RevPAR

$
50.51


$
46.84


$
43.22West RegionNumber of properties


7



7



7Number of rooms


1,316



1,316



1,316Occupancy


68.7
%


67.4
%


62.2
%Average daily rate

$
99.58


$
86.69


$
82.17RevPAR

$
68.41


$
58.45


$
51.12All HotelsNumber of properties


65



65



65Number of rooms


11,749



11,749



11,749Occupancy


62.8
%


62.6
%


61.6
%Average daily rate

$
90.56


$
84.35


$
78.83RevPAR

$
56.88


$
52.79


$
48.53  15




---



##### Table of Contents



Continuing
    Operations  40 hotels (excludes the Pinehurst, West
    Palm Beach, Melbourne and Marietta hotels, and 25 hotels held
    for sale as of December 31, 2006).  2006


2005


2004Northeast RegionNumber of properties


17



17



17Number of rooms


3,462



3,462



3,462Occupancy


67.0
%


66.0
%


69.2
%Average daily rate

$
103.28


$
96.88


$
90.40RevPAR

$
69.17


$
63.99


$
62.54Southeast RegionNumber of properties


8



8



8Number of rooms


1,133



1,133



1,133Occupancy


69.8
%


63.8
%


55.9
%Average daily rate

$
107.41


$
98.73


$
88.81RevPAR

$
74.99


$
63.00


$
49.63Midwest RegionNumber of properties


8



8



8Number of rooms


1,415



1,415



1,415Occupancy


68.0
%


66.7
%


63.6
%Average daily rate

$
89.23


$
83.11


$
77.79RevPAR

$
60.70


$
55.43


$
49.49West RegionNumber of properties


7



7



7Number of rooms


1,316



1,316



1,316Occupancy


68.7
%


67.4
%


62.2
%Average daily rate

$
99.58


$
86.69


$
82.17RevPAR

$
68.41


$
58.45


$
51.12All HotelsNumber of properties


40



40



40Number of rooms


7,326



7,326



7,326Occupancy


67.9
%


66.1
%


64.8
%Average daily rate

$
100.55


$
92.60


$
86.37RevPAR

$
68.30


$
61.19


$
55.97             Hotel
    Encumbrances
   16




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##### Table of Contents



Insurance
    
    general liability;
    property damage and business interruption (including coverage
    for terrorism);
    flood;
    directors and officers liability;
    liquor liability;
    workers compensation;
    fiduciary liability;
    business automobile;
    environmental; and
    employment practices liability insurance.        Regulation
         17




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##### Table of Contents



Employees
    Legal
    Proceedings
    SEC
    Filings and Financial Information
  Form 10-K, Form 10-Q, Form 8-K,
  1-800-SEC-0330.
  page F-1.
  Item 1A.
    Risk
    Factors    
    The effects of regional, national and international economic
    conditions;
    Competitive conditions in the lodging industry and increases in
    room supply; 18




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##### Table of Contents




    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;
    Potential litigation
    and/or
    governmental inquiries and investigations;
    Laws and regulations applicable to our business, including
    federal, state or local hotel, resort, restaurant or land use
    regulations, employment, labor or disability laws and
    regulations;
    A downturn in the economy due to several factors, including but
    not limited to, high energy costs, natural gas and gasoline
    prices; and
    The risks identified below under Risks Related to Our
    Business and Risks Related to Our Common Stock.      Risks
    Related to Our Business
  We may
    not be able to meet the requirements imposed by our franchisors
    in our franchise agreements and therefore could lose the right
    to operate one or more hotels under a national
    brand.
     19




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##### Table of Contents




    multiple franchise agreement defaults and the continuance
    thereof beyond all notice and grace periods for hotels whose
    allocated loan amounts total 10% or more of the outstanding
    principal amount of such Refinancing Debt;
    with regard to the Merrill Lynch Mortgage floating rate
    refinancing debt (Floating Rate Debt), either the
    termination of franchise agreements for more than two properties
    or the termination of franchise agreements for hotels whose
    allocated loan amounts represent more than 5% of the outstanding
    principal amount of the floating rate debt, and such hotels
    continue to operate for more than five consecutive days without
    being subject to replacement franchise agreements;
    with regard to the Merrill Lynch Mortgage fixed rate refinancing
    debt (Fixed Rate Debt), either the termination of
    franchise agreements for more than one property or the
    termination of franchise agreements for hotels whose allocated
    loan amounts represent more than 5% of the outstanding principal
    amount of the fixed rate loan, and such hotels continue to
    operate for more than five consecutive days without being
    subject to replacement franchise agreements; or
    a franchise termination for any hotel currently subject to a
    franchise agreement that remains without a franchise agreement
    for more than six months.         20




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##### Table of Contents



Hotels
    typically require a higher level of capital expenditures,
    maintenance and repairs than other building types. If we are not
    able to meet the requirements of our hotels appropriately, our
    business and operating results will suffer.
  and/or
  Most
    of our hotels are pledged as collateral for mortgage loans, and
    we have a significant amount of debt that could limit our
    operational flexibility or otherwise adversely affect our
    financial condition.
    
    We may not be able to repay or refinance our maturing
    indebtedness on favorable terms or at all. If we are unable to
    refinance or extend the maturity of our maturing indebtedness,
    we may not otherwise be able to repay such indebtedness. Debt
    defaults could lead us to sell one or more of our hotels on
    unfavorable terms or, in the case of secured debt, to convey the
    mortgaged hotel(s) to the lender, causing a loss of any
    anticipated income and cash flow from, and our invested capital
    in, such hotel(s);
    61 of our consolidated hotels are pledged as collateral for
    existing mortgage loans as of December 31, 2006, which
    represented 92.1% of the book value of our consolidated property
    and equipment, net, as of December 31, 2006, and, as a
    result, we have limited flexibility to sell our hotels to
    satisfy cash needs;
    Increased vulnerability to downturns in our business, the
    lodging industry and the general economy;
    Our ability to obtain other financing to fund future working
    capital, capital expenditures and other general corporate
    requirements may be limited;
    Our cash flow from operations may be insufficient to make
    required debt service payments, and we may be required to
    dedicate a substantial portion of our cash flow from operations
    to debt service payments, reducing the availability of our cash
    flow to fund working capital, capital expenditures, and other
    needs and placing us at a competitive disadvantage with other
    companies that have greater resources
    and/or less
    debt; and
    Our flexibility in planning for, or reacting to, changes in our
    business and industry may be restricted, placing us at a
    competitive disadvantage to our competitors that may have
    greater financial strength than we have.  The
    terms of our debt instruments place many restrictions on us,
    which reduce operational flexibility and create default
    risks.
   21




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##### Table of Contents



Rising
    interest rates could have an adverse effect on our cash flow and
    interest expense.
    To
    service our indebtedness, we require a significant amount of
    cash. Our ability to generate cash depends on many factors
    beyond our control and a cash shortfall could adversely affect
    our ability to fund our operations, planned capital expenditures
    and other needs.
    
    Dependence on business and leisure travelers, who have been and
    continue to be affected by threats of terrorism, or other
    outbreaks of hostilities, and new laws to counter terrorism
    which result to some degree in a reduction of foreign travelers
    visiting the U.S.;
    Cyclical overbuilding in the lodging industry;
    Varying levels of demand for rooms and related services;
    Competition from other hotels, motels and recreational
    properties, some of which may be owned or operated by companies
    having greater marketing and financial resources than we have;
    Effects of economic and market conditions;
    Decreases in air travel;
    Fluctuations in operating costs;
    Changes in governmental laws and regulations that influence or
    determine wages or required remedial expenditures;
    Natural disasters, including, but not limited to hurricanes;
    Changes in interest rates and changes in the availability, cost
    and terms of credit; and
    The perception of the lodging industry and lodging companies in
    the debt and equity markets. 22




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##### Table of Contents



The
    value of our hotels and our ability to repay or refinance our
    debt are dependent upon the successful operation and cash flows
    of the hotels.
      
    general market conditions;
    the markets perception of our growth potential;
    our current debt levels and property encumbrances;
    our current and expected future earnings;
    our cash flow and cash needs; and
    the market price per share of our common stock.  If we
    are not able to execute our strategic initiative, we may not be
    able to improve our financial performance.
    Our
    current joint venture investments could be adversely affected by
    our lack of sole decision-making authority, our reliance on
    joint venture partners financial condition and
    performance, and any disputes that may arise between us and our
    joint venture partners.
  and/or
 23




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##### Table of Contents



We
    have a history of significant losses and we may not be able to
    successfully improve our performance to achieve
    profitability.
    Force
    majeure events, including natural disasters, acts and threats of
    terrorism, the ongoing war against terrorism, military conflicts
    and other factors have had and may continue to have a negative
    effect on the lodging industry and our results of
    operations.
    Our
    expenses may remain constant or increase even if revenues
    decline.
    
    Rising interest rates;
    Tightening of funding available to the lodging industry on
    favorable terms, or at all;
    Rising energy costs, gasoline or heating fuel supply shortages;
    Rising insurance premiums;
    Rising property tax expenses;
    Increase in labor and related costs; and
    Changes in, and as a result, increases in the cost of compliance
    with new government regulations, including those governing
    environmental, usage, zoning and tax matters.  We may
    make acquisitions or investments that are not successful and
    that adversely affect our ongoing operations.
    
    Significant errors or miscalculations in identifying suitable
    acquisition or investment candidates, performing appropriate due
    diligence, identifying potential liabilities and negotiating
    favorable terms; 24




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##### Table of Contents




    Reducing our working capital and hindering our ability to expand
    or maintain our business, including making capital expenditures
    and funding operations;
    The potential distraction of our management, diversion of our
    resources and disruption of our business;
    Overpaying by competing for acquisition opportunities with
    resourceful and cash-rich competitors;
    Inaccurate forecasting of the financial impact of an acquisition
    or investment; and
    Failure to effectively integrate acquired companies or
    investments into our Company and the resultant inability to
    achieve expected synergies.  Losses
    may exceed our insurance coverage or estimated reserves, which
    could impair our results of operations, financial condition and
    liquidity.
      
    the insurance coverages that we have obtained will fully protect
    us against insurable losses (i.e., losses may exceed coverage
    limits);
    we will not incur losses from risks that are not insurable or
    that are not economically insurable; or    Competition
    in the lodging industry could have a material adverse effect on
    our business and results of operations.
    Adverse
    conditions in major metropolitan markets in which we do
    substantial business could negatively affect our results of
    operations.
   25




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##### Table of Contents



The
    lodging business is seasonal.
    We are
    exposed to potential risks of brand concentration.
    We
    have experienced significant changes in our senior management
    team.
    Our
    success is dependent on recruiting and retaining high caliber
    key personnel.
    The
    increasing use of third-party travel websites by consumers may
    adversely affect our profitability.
    We
    will be unable to utilize all of our net operating loss
    carryforwards.
   26




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##### Table of Contents



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.
             27




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##### Table of Contents



A
    downturn in the economy due to high energy costs and gasoline
    prices could negatively impact our financial performance, our
    customer guest satisfaction scores and customer service
    levels.
    Risks
    Related to Our Common Stock
  Our
    stock price may be volatile.
    
    Actual or anticipated variations in our results of operations;
    Announcements of new services or products or significant price
    reductions by us or our competitors;
    Market performance by our competitors;
    Future issuances of our common stock, or securities convertible
    into or exchangeable or exercisable for our common stock, by us
    directly, or the perception that such issuances are likely to
    occur;
    Sales of our common stock by stockholders or the perception that
    such sales may occur in the future;
    The size of our market capitalization;
    Loss of our franchises;
    Default on our indebtedness
    and/or
    foreclosure of our properties;
    Changes in financial estimates by securities analysts; and
    Domestic and international economic, legal and regulatory
    factors unrelated to our performance.  We may
    never pay dividends on our common stock, in which event our
    stockholders only return on their investment, if any, will
    occur on the sale of our common stock.
    Our
    charter documents, employment contracts and Delaware law may
    impede attempts to replace or remove our management or inhibit a
    takeover, which could adversely affect the value of our common
    stock.
    
    Authorizing the issuance of preferred stock, the terms of which
    may be determined at the sole discretion of the board of
    directors;
    Establishing advance notice requirements for nominations for
    election to the board of directors or for proposing matters that
    can be acted on by stockholders at meetings; and 28




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##### Table of Contents




    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
  one-for-three
  Over-the-Counter Over-the-Counter
  2005High


LowFirst Quarter

$
12.03


$
10.25Second Quarter

$
11.06


$
8.39Third Quarter

$
10.60


$
10.02Fourth Quarter

$
10.75


$
9.81   2006High


LowFirst Quarter

$
13.93


$
10.69Second Quarter

$
14.25


$
10.92Third Quarter

$
14.21


$
11.61Fourth Quarter

$
15.66


$
12.79   29




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##### Table of Contents



2007High


LowFirst Quarter (up to March 1,
    2007)

$
14.40


$
11.98                30




---



##### Table of Contents




    On January 26, 2007 the Compensation Committee of the Board
    of Directors authorized the issuance of 63,000 shares of
    nonvested stock awards to certain employees. The shares vest in
    equal annual installments on the next three anniversary dates.
    The shares were valued at $12.84, the closing price of the
    Companys common stock on the date of the grant. The
    aggregate value of the grant will be recorded as compensation
    expense over the vesting period.
    On February 12, 2007, the Board of Directors authorized the
    issuance of a total of 46,000 shares of nonvested stock
    awards to all non-employee members of the Board of Directors.
    The shares vest in equal annual installments commencing on
    January 30, 2008. The shares were valued at $12.95, the
    closing price of the Companys common stock on the date of
    the grant. The aggregate value of the grant will be recorded as
    compensation expense over the vesting period.  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


356,313



10.60



2,568,029Equity compensations plans not
    approved by security holders










     (1)
    
    Column (a) excludes Class A & Class B
    warrants which are not a component of the Equity Compensation
    Plan.   31




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##### Table of Contents



:
  Issued Underthe StockIncentive Plan


TypeAvailable under the plan, less
    previously issued as of December 31, 2005


2,545,252Issued January 31, 2006


(12,413
)

restricted stockIssued January 31, 2006


(3,884
)

nonvested stockIssued March 1, 2006


(35,000
)

nonvested stockIssued June 8, 2006


(7,000
)

nonvested stockShares of restricted stock
    withheld from awards to satisfy tax withholding obligations


4,719Nonvested shares forfeited in 2006


777Options forfeited in 2006


75,578Available for issuance,
    December 31, 2006


2,568,029   Treasury
    Stock Repurchases
    Total Number of


Maximum Dollar AmountShares Purchased


of Shares That May YetTotal Number


Average


as Part of Publicly


Be Purchased Underof Shares


Price Paid


Announced Plans


the Publicly AnnouncedPeriod

Purchased(1)


per Share(2)


or Programs


Plans or ProgramsOctober 2006





$







$
12,848,368November 2006





$







$
12,848,368December 2006


45,800


$
13.14



45,800


$
12,245,292Total


45,800


$
13.14



45,800     (1)
    
    The total number of shares purchased includes:  (a)
    shares purchased pursuant to the May 2006 share repurchase
    program, which granted a maximum of $15 million of
    repurchase authority expiring in May 2007, and  (b)
    shares surrendered to the Company to satisfy tax withholding
    obligations in connection with the Stock Incentive Plan, of
    which there were none in October, November and December 2006.  (2)
    
    The average price paid per share excludes commissions. 32




---



##### Table of Contents



Performance
    Graph
      
     1/28/03


12/03


12/04


12/05


12/06Lodgian,
    Inc.



100.00




99.06




77.36




67.48




85.53Dow Jones Wilshire
    5000



100.00




134.81




151.82




161.42




187.05Dow Jones US Hotels



100.00




151.78




221.79




242.09




309.16  33




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##### 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)Successor


PredecessorNovember 23,


1, toto December 31,


November 22,2006


2005


2004


2003


2002


2002Income statement
    data:Revenues  continuing
    operations

$
261,785


$
222,762


$
217,189


$
210,089


$
16,947


$
201,165Revenues  discontinued
    operations


89,986



117,465



143,119



162,462



15,841



176,060Revenues  continuing
    and discontinued operations


351,771



340,227



360,308



372,551



32,788



377,225(Loss) income 
    continuing operations


(10,267
)


10,836



(27,383
)


(16,140
)


(5,220
)


(159,764
)(Loss) income 
    discontinued operations


(4,909
)


1,465



(4,451
)


(15,537
)


(4,128
)


172,152Net (loss) income


(15,176
)


12,301



(31,834
)


(31,677
)


(9,348
)


12,388Net (loss) income attributable to
    common stock


(15,176
)


12,301



(31,834
)


(39,271
)


(10,858
)


12,388(Loss) income from continuing
    operations attributable to common stock before discontinued
    operations


(10,267
)


10,836



(27,383
)


(23,734
)


(6,730
)


(159,764
) 34




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##### Table of Contents



(In thousands, except per-share data)Successor


PredecessorNovember 23,


1, toto December 31,


November 22,2006


2005


2004


2003


2002


2002Basic (loss) earnings per common
    share:(Loss) income 
    continuing operations


(0.42
)


0.44



(1.98
)


(6.92
)


(2.24
)


(5.61
)(Loss) income 
    discontinued operations


(0.20
)


0.06



(0.32
)


(6.66
)


(1.77
)


6.04Net (loss) income


(0.62
)


0.50



(2.30
)


(13.58
)


(4.01
)


0.43Net (loss) income attributable to
    common stock


(0.62
)


0.50



(2.30
)


(16.83
)


(4.65
)


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


(0.42
)


0.44



(1.98
)


(10.17
)


(2.88
)


(5.61
)Diluted (loss) earnings per common
    share:(Loss) income 
    continuing operations


(0.42
)


0.44



(1.98
)


(6.92
)


(2.24
)


(5.61
)(Loss) income 
    discontinued operations


(0.20
)


0.06



(0.32
)


(6.66
)


(1.77
)


6.04Net (loss) income


(0.62
)


0.50



(2.30
)


(13.58
)


(4.01
)


0.43Net (loss) income attributable to
    common stock


(0.62
)


0.50



(2.30
)


(16.83
)


(4.65
)


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


(0.42
)


0.44



(1.98
)


(10.17
)


(2.88
)


(5.61
)Basic weighted average shares(1)


24,617



24,576



13,817



2,333



2,333



28,480Diluted weighted average shares(1)


24,617



24,630



13,817



2,333



2,333



28,480Balance sheet data (at period
    end):Total assets

$
699,158


$
726,685


$
723,648


$
709,460


$
762,263


$
967,489Assets held for sale


89,437



14,866



30,559



68,617



44



129Long-term debt


292,301



394,432



393,143



551,292



389,752



7,215Liabilities related to assets held
    for sale


68,351



4,610



30,572



57,998



44



129Liabilities subject to compromise


















93,816



926,387Mandatorily redeemable 12.25%
    cumulative Series A preferred stock(2)


















126,510



Total liabilities


446,122



466,424



495,385



666,534



553,680



991,040Total liabilities and preferred
    stock


446,122



466,424



495,385



666,534



680,190



991,040Total stockholders equity
    (deficit)


242,114



249,044



226,634



40,606



78,457



(28,841
)     (1)
    
    The number of shares in the Successor period ended
    December 31, 2002, represents the new shares issued on the
    effective date of the plan of reorganization in
    November 25, 2002. The 28,479,837 old shares were cancelled
    and 2,333,333 million new shares (on a post reverse stock
    split basis) were issued, including the shares held in the
    disputed claims reserve. 35




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##### Table of Contents



(2)
    
    The Preferred Stock was issued on November 25, 2002. At
    December 31, 2002, the Preferred Stock was classified
    between long-term debt and equity on the Consolidated Balance
    Sheet, called the mezzanine section. In accordance with
    Statement of Financial Accounting Standards (SFAS)
    No. 150 which was effective on July 1, 2003, we
    reclassified the Preferred Stock to long-term debt. The
    Preferred Stock outstanding at December 31, 2003 was
    $142.2 million, compared to $126.5 million at
    December 31, 2002. In addition, dividends for the
    applicable periods from July 1, 2003 to June 30, 2004
    were reported in interest expense. In accordance with
    SFAS No. 150, we continued to show the dividends for
    the periods from January 1, 2003 to June 30, 2003 and
    from November 23, 2002 to December 31, 2002 as
    deductions from retained earnings. On June 25, 2004, we
    exchanged 3,941,115 shares of our common stock for
    1,483,558 shares of our outstanding Preferred Stock, and,
    on July 26, 2004, we used a portion of the proceeds of our
    public offering of common stock to redeem the remaining
    4,048,183 shares of outstanding Preferred Stock.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation  You should read the discussion below in conjunction with the
    consolidated financial statements and accompanying notes. Also,
    the discussion which follows contains forward-looking statements
    which involve risks and uncertainties. Our actual results could
    differ materially from those anticipated in these
    forward-looking statements as a result of various factors,
    including those discussed above under the caption Risk
    Factors.
  Executive
    Summary
    Continuing


DiscontinuedOperations


Operations


TotalHotel count in portfolio as of
    December 31, 2006 (a)


44



25



69Hotels sold January 1 through
    March 1, 2007






(1
)


(1
)Hotel count in portfolio as of
    March 1, 2007


44



24



68     (a)
    
    Continuing operations hotel count includes the Holiday Inn
    Marietta, GA hotel which closed in January 2006 following a fire.  Operating
    Summary
    
    Revenues increased $39.0 million, or 17.5%, due to an
    increase in rooms sold driven largely by the reopening of our
    two Crowne Plaza hotels in West Palm Beach and Melbourne,
    Florida, ADR, and improved performance in our food and beverage
    operations.
    Direct operating expenses increased $12.9 million or 15.3%,
    driven largely by higher rooms sold as a result of the reopening
    of our two Crowne Plaza hotels in West Palm Beach and Melbourne,
    Florida. Direct operating margin improved $26.1 million or
    18.9%.
    Operating income declined $19.9 million due to a
    $25.6 million decrease in casualty gains. In 2005, we
    realized gains associated with large insurance settlements
    related to our hurricane damaged hotels. 36




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##### Table of Contents



Discontinued
    Operations
          Critical
    Accounting Policies and Estimates
    Consolidation policy
    Deferral policy
  Asset impairment
 37




---



##### Table of Contents



Accrual of self-insured obligations
 38




---



##### Table of Contents



Income
    Statement Overview
    Revenues
    
    Room revenues  derived from guest room rentals;
    Food and beverage revenues  derived from hotel
    restaurants, room service, hotel catering and meeting room
    rentals; and
    Other revenues  derived from guests
    long-distance telephone usage, laundry services, parking
    services, in-room movie services, vending machine commissions,
    leasing of hotel space and other miscellaneous revenues.      
    Occupancy  computed by dividing total room nights
    sold by the total available room nights;
    Average Daily Rate (ADR)  computed by dividing total
    room revenues by total room nights sold; and
    Revenue per available room (RevPAR)  computed by
    dividing total room revenues by total available room nights.
    RevPAR can also be obtained by multiplying the occupancy by the
    ADR.
    RevPAR Index  computed by dividing Lodgians
    RevPAR performance by the industry (or market) RevPAR
    performance which is a measure of market share.  ,
    Operating
    expenses
    
    Direct operating expenses  these expenses tend to
    vary with available rooms and occupancy. However, hotel level
    expenses contain significant elements of fixed costs and,
    therefore, do not decline proportionately with revenues. Direct
    expenses are further categorized as follows:  
    Room expenses  expenses incurred in generating room
    revenues;
    Food and beverage expenses  expenses incurred in
    generating food and beverage revenues; and
    Other direct expenses  expenses incurred in
    generating the revenue activities classified in other
    revenue; 39




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##### Table of Contents



and/or
  
    Other hotel operating expenses  these expenses
    include salaries for hotel management, advertising and
    promotion, franchise fees, repairs and maintenance and utilities;
    Property and other taxes, insurance and leases  these
    expenses include equipment, ground and building rentals,
    insurance, and property, franchise and other taxes;
    Corporate and other  these expenses include corporate
    salaries and benefits, legal, accounting and other professional
    fees, directors fees, costs for office space and
    information technology costs. Also included are costs related to
    compliance with Sarbanes-Oxley legislation;
    Casualty (gains) losses, net   these expenses include
    hurricane and other repair costs and charges related to the
    assets written off that were damaged, netted against any gains
    realized on the final settlement of property damage claims;
    Depreciation and amortization  depreciation of fixed
    assets (primarily hotel assets) and amortization of deferred
    franchise fees; and
    Impairment of long-lived assets  charges which were
    required to write down the carrying values of long-term assets
    to their fair values on assets where the estimated undiscounted
    cash flows over the life of the asset were less than the
    carrying value of the asset.  Non-operating
    items
    
    Business interruption insurance proceeds represent insurance
    proceeds for lost profits as a result of a business shutdown.
    Our 2006 business interruption proceeds relate primarily to the
    recovery of lost profits and reimbursement for additional
    expenses incurred at the Crowne Plazas at West Palm Beach and
    Melbourne, FL hotels as a result of hurricane damage sustained
    during the 2004 hurricane season.
    Interest expense and other financing costs includes interest
    expense (which includes amortization of deferred loan costs) and
    loss on preferred stock redemption;
    Interest income;
    Our 30% share of the income or loss of our non-controlling
    equity interest in one hotel, for which we accounted using the
    equity method of accounting for 2004 and prior years but which
    we wrote off in 2005 as the hotel was surrendered to the lender
    on November 15, 2005; and
    Minority interests  our equity partners share
    of the income or loss of the three hotels owned by joint
    ventures that we consolidate. 40




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##### Table of Contents



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


2005


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

$
197,719


$
168,028


$
29,691



17.7
%Food and beverage


55,792



46,869



8,923



19.0
%Other


8,274



7,865



409



5.2
%Total revenues


261,785



222,762


$
39,023



17.5
%Occupancy


67.5
%


65.9
%






2.4
%ADR

$
101.47


$
91.51


$
9.96



10.9
%RevPAR

$
68.45


$
60.35


$
8.10



13.4
%             41




---



##### Table of Contents



Hotel Count


Room Count




2006


2005


Increase (Decrease)44



8,117


All Continuing
    OperationsOccupancy


67.5
%


65.9
%






2.4
%ADR

$
101.47


$
91.51


$
9.96



10.9
%RevPAR

$
68.45


$
60.35


$
8.10



13.4
%43



7,924


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


67.4
%


66.0
%






2.1
%ADR

$
101.54


$
92.43


$
9.11



9.9
%RevPAR

$
68.48


$
60.96


$
7.52



12.3
%RevPAR Index


99.6
%


95.3
%






4.5
%41



7,433


Continuing Operations less two
    hotels closed in 2005 due to hurricane damage and one hotel
    closed in 2006 due to fireOccupancy


67.9
%


66.0
%






2.9
%ADR

$
100.19


$
92.43


$
7.76



8.4
%RevPAR

$
68.03


$
60.97


$
7.06



11.6
%RevPAR Index


99.7
%


96.6
%






3.2
%33



5,664


Continuing Operations less two
    hotels closed in 2005 due to hurricane damage, one hotel closed
    in 2006 due to fire and hotels under renovation in 2005 and/or
    2006Occupancy


68.2
%


68.6
%






-0.6
%ADR

$
98.43


$
91.21


$
7.22



7.9
%RevPAR

$
67.09


$
62.57


$
4.52



7.2
%RevPAR Index


101.6
%


102.6
%






-1.0
%20



3,335


Hotels completing major
    renovations in 2004 and 2005Occupancy


69.5
%


65.0
%






6.9
%ADR

$
102.77


$
92.64


$
10.13



10.9
%RevPAR

$
71.20


$
60.22


$
10.98



18.2
%RevPAR Index


100.0
%


92.0
%






8.7
%12



1,398


Marriott HotelsOccupancy


72.5
%


73.0
%






-0.7
%ADR

$
106.59


$
96.16


$
10.43



10.8
%RevPAR

$
77.31


$
70.15


$
7.16



10.2
%RevPAR Index


116.9
%


115.5
%






1.2
%4



777


Hilton HotelsOccupancy


64.7
%


66.9
%






-3.3
%ADR

$
104.47


$
96.59


$
7.88



8.2
%RevPAR

$
67.57


$
64.61


$
2.96



4.6
%RevPAR Index


91.3
%


91.7
%






-0.4
% 42




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##### Table of Contents



Hotel Count


Room Count




2006


2005


Increase (Decrease)22



4,750


IHG Hotels less two hotels
    closed in 2005 due to hurricane damage and one hotel closed in
    2006 due to fireOccupancy


67.2
%


64.7
%






3.9
%ADR

$
97.32


$
90.69


$
6.63



7.3
%RevPAR

$
65.39


$
58.69


$
6.70



11.4
%RevPAR Index


96.4
%


93.1
%






3.5
%3



508


Other Brands and Independent
    Hotels(A)Occupancy


66.7
%


57.1
%






16.8
%ADR

$
101.72


$
90.28


$
11.44



12.7
%RevPAR

$
67.85


$
51.50


$
16.35



31.7
%RevPAR Index


97.6
%


85.8
%






13.8
%     Direct
    operating expenses  Continuing Operations
  % of Total Revenues2006


2005


Increase (decrease)


2006


2005($ in thousands)Direct operating expenses:Rooms

$
51,272


$
45,028


$
6,244



13.9
%


19.6
%


20.2
%Food and beverage


39,623



33,114



6,509



19.7
%


15.1
%


14.9
%Other


6,161



6,019



142



2.4
%


2.4
%


2.7
%Total direct operating expenses

$
97,056


$
84,161


$
12,895



15.3
%


37.1
%


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

$
146,447


$
123,000


$
23,447



19.1
%Food and beverage


16,169



13,755



2,414



17.5
%Other


2,113



1,846



267



14.5
%Total direct operating margin

$
164,729


$
138,601


$
26,128



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


74.1
%


73.2
%Food and beverage


29.0
%


29.3
%Other


25.5
%


23.5
%Total direct operating margin


62.9
%


62.2
%    43




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##### Table of Contents



ramp-up
    Other
    operating expenses  Continuing Operations
  % of Total Revenues2006


2005


Increase (decrease)


2006


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

$
15,650


$
15,110


$
540



3.6
%


6.0
%


6.8
%Advertising and promotion


12,819



11,171



1,648



14.8
%


4.9
%


5.0
%Franchise fees


18,547



15,578



2,969



19.1
%


7.1
%


7.0
%Repairs and maintenance


13,059



11,753



1,306



11.1
%


5.0
%


5.3
%Utilities


14,436



13,215



1,221



9.2
%


5.5
%


5.9
%Other expenses


188



405



(217
)


(53.6
)%


0.1
%


0.2
%Total other hotel operating
    expenses


74,699



67,232



7,467



11.1
%


28.5
%


30.2
%Property and other taxes,
    insurance and leases


20,793



16,751



4,042



24.1
%


7.9
%


7.5
%Corporate and other


20,760



20,016



744



3.7
%


7.9
%


9.0
%Casualty (gains) losses, net


(2,888
)


(28,464
)


25,576



89.9
%


(1.1
)%


(12.8
)%Depreciation and amortization


30,718



22,040



8,678



39.4
%


11.7
%


9.9
%Impairment of long-lived assets


758



1,244



(486
)


(39.1
)%


0.3
%


0.6
%Total other operating expenses

$
144,840


$
98,819


$
46,021



46.6
%


55.3
%


44.4
%Total operating expenses

$
241,896


$
182,980


$
58,916



32.2
%


92.4
%


82.1
%Operating income

$
19,889


$
39,782


$
(19,893
)


(50.0
)%


7.6
%


17.9
%     
    Franchise fees increased $3.0 million, or 19.1%, primarily
    as a result of revenue growth. As a percentage of revenues,
    franchise fees increased slightly from 7.0% in 2005 to 7.1% in
    2006.
    Advertising and promotion costs increased $1.6 million, or
    14.8%. As a percentage of revenue, advertising and promotional
    costs declined 10 basis points to 4.9%. Payroll costs were
    up $1.0 million due to the reopening of the West Palm Beach
    and Melbourne, Florida Crowne Plaza hotels as well as increased
    staffing related to marketing and sales programs designed to
    drive higher revenues;
    Repairs and maintenance expenses were increased
    $1.3 million, or 11.1%, primarily because of several large
    repair projects, as well as higher automobile fuel costs
    associated with our fleet of vans. As a percentage of total
    revenues, repairs and maintenance costs decreased 30 basis
    points from 5.3% in 2005 to 5.0% in 2006.
    Utilities costs increased $1.2 million, or 9.2%.
    $0.9 million of the increase was associated with the
    reopening of the Crowne Plaza Hotels in West Palm Beach and
    Melbourne, FL. The remaining increase is driven largely by
    higher occupancy. 44




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##### Table of Contents




    General and administrative costs increased $0.5 million,
    due to the reopening of the West Palm Beach and Melbourne FL,
    Crowne Plaza Hotels. Excluding these two hotels, general and
    administrative costs declined $0.1 million. As a percent of
    revenues, general and administrative expenses declined
    80 basis points in 2006 to 6.0%.            Non-operating
    income (expenses)  Continuing Operations
  2006


2005


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

$
3,931


$
9,595


$
(5,664
)


(59.0
)%Interest income and other


2,607



833



1,774



213.0
%Interest expense


(25,348
)


(21,353
)


3,995



18.7
%Minority interests


295



(9,492
)


(9,787
)


(103.1
)%        45




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##### Table of Contents



Results
    of operations for the twelve months ended December 31, 2005
    and December 31, 2004
  Revenues 
    Continuing Operations
  Increase2005


2004


(decrease)($ in thousands)Revenues:Rooms

$
168,028


$
160,863


$
7,165



4.5
%Food and beverage


46,869



48,260



(1,391
)


(2.9
)%Other


7,865



8,066



(201
)


(2.5
)%Total revenues


222,762



217,189


$
5,573



2.6
%Occupancy


65.9
%


64.8
%






1.7
%ADR

$
91.51


$
85.91


$
5.61



6.5
%RevPAR

$
60.35


$
55.71


$
4.64



8.3
%      46




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##### Table of Contents



Direct
    operating expenses  Continuing Operations
  Increase


% of Total Revenues2005


2004


(decrease)


2005


2004($ in thousands)Direct operating expenses:Rooms

$
45,028


$
43,557


$
1,471



3.4
%


20.2
%


20.1
%Food and beverage


33,114



33,655



(541
)


(1.6
)%


14.9
%


15.5
%Other


6,019



5,793



226



3.9
%


2.7
%


2.7
%Total direct operating expenses

$
84,161


$
83,005


$
1,156



1.4
%


37.8
%


38.2
%Direct operating margin (by
    revenue source):Rooms

$
123,000


$
117,306


$
5,694



4.9
%Food and beverage


13,755



14,605



(850
)


(5.8
)%Other


1,846



2,273



(427
)


(18.8
)%Total direct operating margin

$
138,601


$
134,184


$
4,417



3.3
%Direct operating margin % (by
    revenue source):Rooms


73.2
%


72.9
%Food and beverage


29.3
%


30.3
%Other


23.5
%


28.2
%Total direct operating margin


62.2
%


61.8
%        47




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##### Table of Contents



Other
    operating expenses  Continuing Operations
  % of Total Revenues2005


2004


Increase (decrease)


2005


2004($ in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative

$
15,110


$
14,123


$
987



7.0
%


6.8
%


6.5
%Advertising and promotion


11,171



9,837



1,334



13.6
%


5.0
%


4.5
%Franchise fees


15,578



14,863



715



4.8
%


7.0
%


6.8
%Repairs and maintenance


11,753



11,504



249



2.2
%


5.3
%


5.3
%Utilities


13,215



11,910



1,305



11.0
%


5.9
%


5.5
%Other expenses


405



81



324



400.0
%


0.2
%


0.0
%Total other hotel operating
    expenses


67,232



62,318



4,914



7.9
%


30.2
%


28.7
%Property and other taxes,
    insurance and leases


16,751



15,590



1,161



7.4
%


7.5
%


7.2
%Corporate and other


20,016



16,886



3,130



18.5
%


9.0
%


7.8
%Casualty (gains) losses, net


(28,464
)


1,986



(30,450
)


(1533.2
)%


(12.8
)%


0.9
%Depreciation and amortization


22,040



18,946



3,094



16.3
%


9.9
%


8.7
%Impairment of long-lived assets


1,244



412



832



201.9
%


0.6
%


0.2
%Total other operating expenses

$
98,819


$
116,138


$
(17,319
)


(14.9
)%


44.4
%


53.5
%Total operating expenses

$
182,980


$
199,143


$
(16,163
)


(8.1
)%


82.1
%


91.7
%Operating income

$
39,782


$
18,046


$
21,736



120.4
%


17.9
%


8.3
%     
    General and administrative costs increased $1.0 million, or
    7.0% primarily due to a $0.5 million increase in salary and
    employee benefits, $0.4 million in costs related to bad
    debt expense associated with bankruptcies in the airline
    industry and data costs for brand mandated property management
    system upgrades. The remaining increase of $0.1 million was
    a result of ongoing costs associated with operating the two
    hotels that were closed due to hurricane damage for the majority
    of the year;
    Advertising and promotion expenses increased $1.3 million,
    or 13.6%, due to the addition of sales personnel and sales
    programs to promote our newly renovated properties including the
    Crowne Plaza hotels in West Palm Beach and Melbourne, FL;
    Franchise fees increased $0.7 million, or 4.8% as a result
    of revenue growth and costs associated with brand loyalty
    programs; and,
    Utilities increased $1.3 million or 11.0%, due to
    significant increases in electricity and fuel rates.     48




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##### Table of Contents



Non-operating
    income (expenses)  Continuing Operations
  2005


2004


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

$
9,595


$



$
9,595



n/mInterest income and other


833



680



153



22.5
%Interest expense and other
    financing costs:Preferred stock dividend






(9,383
)


(9,383
)


(100.0
)%Interest expense


(21,353
)


(31,033
)


(9,680
)


(31.2
)%Loss on preferred stock
    redemption






(6,063
)


(6,063
)


(100.0
)%Minority interests


(9,492
)


595



10,087



1695.3
%            49




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##### Table of Contents



Results
    of Operations  Discontinued Operations
          
    $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;
    $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; 50




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##### Table of Contents




    $0.9 million on the Holiday Inn Lancaster, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $6.4 million on the Holiday Inn Lansing, MI, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.6 million on the Holiday Inn Clarksburg, WV, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell; and
    $0.1 million on the Holiday Inn Jekyll Island, GA to record
    the disposal costs of furniture, fixtures and equipment incurred
    during the closing of the hotel.    
    $1.8 million on the Azalea Inn Valdosta, GA to reduce the
    carrying value to estimated selling price;
    $1.7 million on the Holiday Inn Rolling Meadows, IL to
    reflect the lowered selling price and to record the final
    disposition of the hotel;
    $1.7 million on the Holiday Inn Sheffield, AL to reduce the
    carrying value to estimated selling price;
    $1.6 million on the Holiday Inn Lawrence, KS to reflect the
    reduced fair value appraisal;
    $1.3 million on the Holiday Inn St. Louis, MO to
    reflect the reduced selling price of the hotel;
    $1.1 million on the Park Inn Brunswick, GA, to write-off
    the capital improvements made on this property related to the
    franchise conversion that did not result in an increase in the
    fair value of this hotel;
    $0.9 million on the Holiday Inn Hamburg, NY, as the
    undiscounted future cash flows were less than the assets
    carrying value and the resulting broker opinion required a
    write-down of the carrying value of the asset to its fair value;
    $0.4 million on the land parcel in Mt. Laurel, NJ to
    reflect the lowered estimated selling price of the land;
    $0.3 million on the Holiday Inn Express Gadsden, AL to
    reflect the estimated selling costs as this hotel was identified
    for sale in January 2005, to reflect the write-off of capital
    improvements spent on this hotel for franchisor compliance that
    did not add incremental value or revenue generating capacity to
    the property, and to record the final disposition of the hotel;
    $0.3 million on the Holiday Inn Morgantown, WV to reflect
    the reduced selling price of the hotel and the additional
    charges to dispose of the hotel in February 2005; and
    $0.1 million on the Holiday Inn McKnight, PA as the hotel
    was identified for sale in 2005 and its carrying value was
    adjusted to the estimated selling price less selling costs.    
    $3.7 million on the Park Inn Brunswick, GA, which was
    converted from a Holiday Inn, as this hotel lost the business of
    a significant military group contract and the conversion of this
    hotel to a Park Inn was not expected to improve operating
    results;
    $1.7 million on the Holiday Inn Rolling Meadows, IL to
    record the difference between the estimated selling price and
    the carrying value of this hotel consistent with an offer
    received on the hotel;
    $1.1 million on the Holiday Inn Express Gadsden, AL as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets carrying value. The
    estimated selling price of this hotel was negatively impacted by
    its franchise agreement expiring in August 2005 and the
    franchisor indicating that it would not renew the agreement; 51




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##### Table of Contents




    $1.0 million on the Holiday Inn Austin (South), TX to
    reflect a reduction in the estimated selling price due to
    feedback from potential buyers that this hotel had limited
    future franchise options due to its exterior corridors;
    $0.9 million on the Holiday Inn St. Louis North, MO as
    this hotel was identified for sale in January 2005 and the
    estimated selling price was less than the assets
    previously adjusted carrying value;
    $0.7 million on the Holiday Inn Memphis, TN to reflect the
    reduced selling price and additional charges to dispose of this
    hotel in December 2004;
    $0.6 million on the Holiday Inn Lawrence, KS to reflect the
    continued declining financial performance of this hotel which
    was in need of a major renovation; when management was notified
    that the franchise agreement would not be renewed, it was
    determined that renovations were not economically justifiable;
    $0.6 million on the Quality Hotel & Conference
    Center Metairie, LA as capital improvements were spent on health
    and safety items that added no incremental market value or
    revenue generating capacity at this hotel, resulting in the
    recording of impairment to reduce the assets carrying
    value to the fair value;
    $0.5 million on the Downtown Plaza Hotel Cincinnati, OH to
    reflect the lowered estimated selling price of the hotel and the
    loss recorded on sale of the hotel in April 2004;
    $0.4 million on the Holiday Inn Morgantown, WV as capital
    improvements were spent on this hotel for franchise compliance
    that did not add incremental value or revenue generating
    capacity to the property;
    $0.4 million on the Holiday Inn Florence, KY, primarily
    related to disposal costs incurred on the sale of the hotel in
    December 2004; and
    $0.1 million on the Holiday Inn Express Pensacola, GL to
    reflect the loss recorded on sale of this hotel March 2004.    Income
    Taxes
    SOP 90-7
  EBITDA
   52




---



##### Table of Contents



2006


2005


2004($ in thousands)(Loss) income from continuing
    operations

$
(10,267
)

$
10,836


$
(27,383
)Depreciation and amortization


30,718



22,040



18,946Interest income


(2,607
)


(1,026
)


(645
)Interest expense


25,348



21,353



31,033Preferred stock dividend










9,383Loss on preferred stock redemption










6,063Provision for income
    taxes  continuing operations


11,641



8,529



225EBITDA from continuing operations

$
54,833


$
61,732


$
37,622     2006


2005


2004($ in thousands)Post-emergence Chapter 11
    expenses, included in corporate and other on consolidated
    statement of operations

$
3


$
173


$
458Impairment of long-lived assets


758



1,244



412Casualty (gains) losses, net (1)


(3,303
)


(20,570
)


1,576Business interruption insurance
    proceeds (1)


(3,643
)


(7,434
)


Write-off of receivable from
    non-consolidated hotel






747



Adjustments to bankruptcy claims
    reserve










(38
)Write-off of investment in
    subsidiary for non-consolidated hotel






170



     (1)
    
    Amount is net of the related minority interest effect. 53




---



##### Table of Contents



Quarterly
    Results of Operations
  Forms 10-Q
  2006


2005Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


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

$
45,617


$
50,445


$
53,788


$
47,869


$
40,957


$
44,652


$
44,058


$
38,361Food and beverage


15,134



12,912



15,636



12,110



11,973



11,570



13,152



10,174Other


2,066



2,105



2,154



1,949



1,849



2,014



2,043



1,95962,817



65,462



71,578



61,928



54,779



58,236



59,253



50,494Direct operating expenses:Rooms


12,462



13,297



13,310



12,203



11,253



11,766



11,586



10,423Food and beverage


10,363



9,772



10,469



9,019



8,444



8,277



8,989



7,404Other


1,456



1,523



1,657



1,525



1,484



1,517



1,567



1,45124,281



24,592



25,436



22,747



21,181



21,560



22,142



19,27838,536



40,870



46,142



39,181



33,598



36,676



37,111



31,216Other operating expenses:Other hotel operating costs


18,304



19,078



18,751



18,566



17,265



17,813



16,282



15,872Property and other taxes, insurance
    and leases


5,813



5,862



4,717



4,401



3,937



4,357



4,278



4,179Corporate and other


4,959



5,592



5,292



4,917



4,314



5,771



5,282



4,649Casualty (gain) losses, net






(3,085
)


31



166



(28,754
)


190







100Depreciation and amortization


7,770



7,886



7,704



7,358



7,002



5,250



5,007



4,781Impairment of long-lived assets


225



323



16



194



1,018



83



64



79Other operating expenses


37,071



35,656



36,511



35,602



4,782



33,464



30,913



29,6601,465



5,214



9,631



3,579



28,816



3,212



6,198



1,556Other income (expenses):Business interruption insurance
    proceeds


530



2,706



695







1,772



6,094



1,729



Interest income and other


664



786



848



309



271



340



51



171Interest expense


(6,297
)


(6,482
)


(6,228
)


(6,341
)


(5,485
)


(5,285
)


(5,275
)


(5,308
)(Loss) income before income taxes
    and minority interest


(3,638
)


2,224



4,946



(2,453
)


25,374



4,361



2,703



(3,581
)Minority interests in loss (income)


335



100



(136
)


(4
)


(8,486
)


(1,127
)


(120
)


241(Loss) income before income
    taxes  continuing operations


(3,303
)


2,324



4,810



(2,457
)


16,888



3,234



2,583



(3,340
)(Provision) benefit for income
    taxes  continuing operations


(9,082
)


(1,039
)


(2,245
)


725



(8,383
)


(12
)


(67
)


(67
)(Loss) Income from continuing
    operations


(12,385
)


1,285



2,565



(1,732
)


8,505



3,222



2,516



(3,407
)Discontinued operations:(Loss) income from discontinued
    operations before income taxes


(12,765
)


(1,917
)


1,852



4,813



(1,014
)


6,487



(642
)


(3,583
)Minority interests






























(96
)Income tax benefit (provision)


4,437



794



(416
)


(1,707
)


313











(Loss) income from discontinued
    operations


(8,328
)


(1,123
)


1,436



3,106



(701
)


6,487



(642
)


(3,679
)Net (loss) income attributable to
    common stock

$
(20,713
)

$
162


$
4,001


$
1,374


$
7,804


$
9,709


$
1,874


$
(7,086
)Net (loss) income from continuing
    operations attributable to common stock:Basic

$
(0.50
)

$
0.05


$
0.10


$
(0.07
)

$
0.35


$
0.13


$
0.10


$
(0.14
)Diluted

$
(0.50
)

$
0.05


$
0.10


$
(0.07
)

$
0.35


$
0.13


$
0.10


$
(0.14
)  54




---



##### Table of Contents



2006


2005Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter($ in thousands)Continuing operations:(Loss) income from continuing
    operations

$
(12,385
)

$
1,285


$
2,565


$
(1,732
)

$
8,505


$
3,222


$
2,516


$
(3,407
)Depreciation and amortization


7,770



7,886



7,704



7,358



7,002



5,250



5,007



4,781Interest income


(664
)


(786
)


(848
)


(309
)


(262
)


(340
)


(204
)


(220
)Interest expense


6,297



6,482



6,228



6,341



5,485



5,285



5,275



5,308Provision (benefit) for income
    taxes  continuing operations


9,082



1,039



2,245



(725
)


8,383



12



67



67EBITDA from continuing operations

$
10,100


$
15,906


$
17,894


$
10,933


$
29,113


$
13,429


$
12,661


$
6,529     2006


2005Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter($ in thousands)Post-emergence Chapter 11
    expenses, included in corporate and other on consolidated
    statement of operations

$



$



$



$
3


$
(2
)

$
13


$
52


$
110Impairment of long-lived assets


225



324



16



193



1,019



83



64



78Casualty (gains) losses, net(1)






(3,465
)


30



132



(20,858
)


188







100Business interruption insurance
    proceeds(1)


(696
)


(2,252
)


(695
)






(1,223
)


(4,780
)


(1,431
)


Write-off of receivable from
    non-consolidated hotel


















1



(200
)


946



Write-off of investment in
    subsidiary for non-consolidated hotel


























170



     (1)
    
    Amount is net of the related minority interest effect.    Liquidity
    and Capital Resources
  Working
    Capital
     55




---



##### Table of Contents



Cash
    Flow
    Operating
    activities
    Investing
    activities
   56




---



##### Table of Contents



Financing
    activities
    Debt and
    contractual obligations
    Contractual Obligations by YearTotal


2007


2008


2009


2010


2011


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

$
58,118


$
822


$
57,296


$



$



$



$
Merrill Lynch Mortgage Lending,
    Inc.  Fixed


239,383



4,470



4,743



230,170











Total  Merrill Lynch
    Mortgage Lending, Inc.


297,501



5,292



62,039



230,170











Other
    Financings:Computer Share Trust Company of
    Canada


7,551



7,551



















Lehman Brothers Holdings, Inc.


15,194



15,194



















Wachovia


36,081



656



691



740



3,633



30,361



IXIS


40,500



19,224



21,276















Total  Other
    Financing


99,326



42,625



21,967



740



3,633



30,361



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


1,263



615



616



32











Other Long-term Liabilities


1,039



575



194



219



45



6



2,302



1,190



810



251



45



6



Total Debt Obligations


399,129



49,107



84,816



231,161



3,678



30,367



Less: Debt Obligations 
    Discontinued


60,271



2,550



39,677



18,023



18



3



Total Debt Obligations 
    Continued

$
338,858


$
46,557


$
45,139


$
213,138


$
3,660


$
30,364


$
OTHER
    OBLIGATIONSInterest Expense(3)

$
63,062


$
31,274


$
18,589


$
10,964


$
1,967


$
268


$
Ground, Parking and Other Lease
    Obligations


85,484



3,460



3,444



3,466



3,492



3,150



68,472Purchase Obligations


1,013



668



261



84











Total Other Obligations


149,559



35,402



22,294



14,514



5,459



3,418



68,472Less: Other Obligations 
    Discontinued


16,840



5,228



1,634



894



326



358



8,400Total Other Obligations 
    Continued

$
132,719


$
30,174


$
20,660


$
13,620


$
5,133


$
3,060


$
60,072TOTAL
    OBLIGATIONSTotal Obligations

$
548,688


$
84,509


$
107,110


$
245,675


$
9,137


$
33,785


$
68,472Less: Total Obligations 
    Discontinued


77,111



7,778



41,311



18,917



344



361



8,400Total Obligations 
    Continued

$
471,577


$
76,731


$
65,799


$
226,758


$
8,793


$
33,424


$
60,072  57




---



##### Table of Contents



(1)
    
    Discussed in Note 9, Long-Term Liabilities in
    the notes to our consolidated financial statements.(2)
    
    Comprised of unsecured notes payable of $1.3 million for
    pre-petition bankruptcy related tax obligations and
    $1.0 million of other obligations.(3)
    
    The computation of interest expense related to our variable rate
    debt assumes a LIBOR of 5.35% for all future periods.    Refinancing
    Debt
  30-day
         58




---



##### Table of Contents



Other
    Financings
  30-day
        30-day
 59




---



##### Table of Contents



Summary
    of Long-term Debt
    December 31, 2006


December 31, 2005Number


Property, Plant


Long-Term


Long-Termof Hotels


and Equipment, Net


Liabilities


Liabilities


Interest Rates at December 31, 2006Refinancing
    DebtMerrill Lynch Mortgage Lending,
    Inc.  Floating


15


$
72,173


$
58,118


$
67,546


LIBOR plus 3.40%; capped at 9.4%Merrill Lynch Mortgage Lending,
    Inc.  Fixed


33



319,085



239,383



252,377


6.58%Merrill Lynch Mortgage Lending,
    Inc.  Total


48



391,258



297,501



319,923Other
    FinancingsComputer Share Trust Company of
    Canada


1



15,579



7,551



7,838


7.88%Column Financial, Inc.














10,337Lehman Brothers Holdings, Inc.


4



45,275



15,194



22,398


$8,726 at 9.40%; $6,468 at 8.90%JP Morgan Chase Bank














10,064Wachovia


4



36,320



36,081



13,173


$9,845 at 6.03%; $3,115 at 5.78%;
    23,122 at 6.04%IXIS


4



36,701



40,500



19,000


$19,000 at LIBOR plus 2.90%, capped
    at 8.4%;$21,500 at LIBOR plus 2.95%, capped
    at 8.45%Column Financial, Inc.














8,146Total  other financing


13



133,875



99,327



90,95661



525,133



396,828



410,879


7.14%(1)Long-term
    liabilities  otherTax notes issued pursuant to our
    Joint Plan of Reorganization










1,263



2,220Other










1,038



1,151







2,301



3,371Property, plant and
    equipment  unencumbered


8



45,351







69



570,484



399,129



414,250Held for sale


(25
)


(83,462
)


(60,271
)


(1,287
)Total December 31, 2006(2)


44


$
487,022


$
338,858


$
412,963     (1)
    
    The 7.14% in the table above represents the weighted average
    annualized cost of debt at December 31, 2006.(2)
    
    Long term debt obligations at December 31, 2006 and
    December 31, 2005 include the current portion.  Preferred
    Stock
    Franchise
    Agreements and Capital Expenditures
     60




---



##### Table of Contents



2006


2005


2004($ in thousands)Continuing operations

$
18,547


$
15,578


$
14,863Discontinued operations


6,996



8,066



9,498$
25,543


$
23,644


$
24,361           Off
    Balance Sheet Arrangements
    New
    Accounting Pronouncements
   61




---



##### Table of Contents



06-03,
 62




---



##### Table of Contents



06-03 06-03
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      25-month
  24-month
       63




---



##### 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,
 64




---



##### Table of Contents



Changes in Internal Control Over Financial
    Reporting.
     65




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control 
    Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
  Share-Based Payment.
      66




---



##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships, Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  (a)
    (1) Our Consolidated Financial Statements are filed as a
    separate section of this report commencing on
    page F-1:         67




---



##### Table of Contents



SIGNATURES      By:
    /s/  Edward
    J. Rohling   President and Chief Executive Officer
    Signature

Title/s/  Edward
    J. RohlingEdward
    J. Rohling

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

Executive Vice President and Chief
    Financial Officer/s/  Russel
    S. BernardRussel
    S. Bernard

Chairman of the Board of Directors/s/  Sean
    F.
    ArmstrongSean
    F. Armstrong

Director/s/  Stewart
    J. BrownStewart
    J. Brown

Director/s/  Stephen
    P.
    GrathwohlStephen
    P. Grathwohl

Director/s/  Kevin
    C. McTavishKevin
    C. McTavish

Director/s/  Dr.
    Sheryl E.
    KimesDr.
    Sheryl E. Kimes

Director/s/  Alex
    R. LieblongAlex
    R. Lieblong

Director  68




---



##### Table of Contents



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


F-2Consolidated
    Balance Sheets as of December 31, 2006 and
    December 31, 2005


F-3Consolidated
    Statements of Operations for the years ended December 31,
    2006, December 31, 2005 and December 31,
    2004


F-4Consolidated
    Statements of Stockholders Equity for the years ended
    December 31, 2006, December 31, 2005 and
    December 31, 2004


F-5Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, December 31, 2005 and December 31,
    2004


F-6Notes to the
    Consolidated Financial Statements


F-7    F-1




---



##### Table of Contents



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




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31, 2006


December 31, 2005($ in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
48,188


$
19,097Cash, restricted


13,791



15,003Accounts receivable (net of
    allowances: 2006  $277;
    2005  $1,101)


7,404



8,054Insurance receivable


2,347



11,725Inventories


2,893



3,955Prepaid expenses and other current
    assets


22,450



20,101Assets held for sale


89,437



14,866Total current assets


186,510



92,801Property and equipment, net


487,022



606,862Deposits for capital expenditures


19,802



19,431Other assets


5,824



7,591$
699,158


$
726,685LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
7,742


$
14,709Other accrued liabilities


27,724



31,528Advance deposits


1,384



1,914Insurance advances


2,063



700Current portion of long-term
    liabilities


46,557



18,531Liabilities related to assets held
    for sale


68,351



4,610Total current liabilities


153,821



71,992Long-term liabilities


292,301



394,432Total liabilities


446,122



466,424Minority interests


10,922



11,217Commitments and contingenciesStockholders equity:Common stock, $.01 par value,
    60,000,000 shares authorized; 24,860,321 and 24,648,405
    issued at December 31, 2006 and December 31, 2005,
    respectively


249



246Additional paid-in capital


327,634



317,034Unearned stock compensation






(604
)Accumulated deficit


(84,816
)


(69,640
)Accumulated other comprehensive
    income


2,088



2,234Treasury stock, at cost, 251,619
    and 21,633 shares at December 31, 2006 and
    December 31, 2005, respectively


(3,041
)


(226
)Total stockholders equity


242,114



249,044$
699,158


$
726,685    F-3




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  For the Years Ended2006


2005


2004($ in thousands)Revenues:Rooms

$
197,719


$
168,028


$
160,863Food and beverage


55,792



46,869



48,260Other


8,274



7,865



8,066Total revenues


261,785



222,762



217,189Direct operating expenses:Rooms


51,272



45,028



43,557Food and beverage


39,623



33,114



33,655Other


6,161



6,019



5,793Total direct operating expenses


97,056



84,161



83,005164,729



138,601



134,184Other operating expenses:Other hotel operating costs


74,699



67,232



62,318Property and other taxes,
    insurance, and leases


20,793



16,751



15,590Corporate and other


20,760



20,016



16,886Casualty (gains) losses, net


(2,888
)


(28,464
)


1,986Depreciation and amortization


30,718



22,040



18,946Impairment of long-lived assets


758



1,244



412Total other operating expenses


144,840



98,819



116,138Operating income


19,889



39,782



18,046Other income (expenses):Business interruption insurance
    proceeds


3,931



9,595



Interest income and other


2,607



833



680Interest expense and other
    financing costs:Preferred stock dividend










(9,383
)Interest expense


(25,348
)


(21,353
)


(31,033
)Loss on preferred stock redemption










(6,063
)Income (loss) before income taxes
    and minority interests


1,079



28,857



(27,753
)Minority interests in loss (income)


295



(9,492
)


595Provision for income
    taxes  continuing operations


(11,641
)


(8,529
)


(225
)(Loss) income from continuing
    operations


(10,267
)


10,836



(27,383
)Discontinued operations:(Loss) income from discontinued
    operations before income taxes


(8,017
)


1,248



(4,547
)Minority interests 
    discontinued operations






(96
)


96Benefit for income
    taxes  discontinued operations


3,108



313



(Loss) income from discontinued
    operations


(4,909
)


1,465



(4,451
)Net (loss) income attributable to
    common stock

$
(15,176
)

$
12,301


$
(31,834
)Net (loss) income per share
    attributable to common stock:Basic

$
(0.62
)

$
0.50


$
(2.30
)Diluted

$
(0.62
)

$
0.50


$
(2.30
)    F-4




---



##### Table of Contents



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








TotalAdditional


Unearned





Other








StockholdersCommon Stock


Paid-In


Stock


Accumulated


Comprehensive


Treasury Stock


EquityShares


Amount


Capital


Compensation


Deficit


Income


Shares


Amount


(Deficit)($ in thousands, except share data)Balance December 31, 2003


2,333,591


$
23


$
89,874


$
(508
)

$
(50,107
)

$
1,324






$



$
40,606Fractional shares cancelled on
    reverse stock split


(971
)






(5
)






















(5
)Issuance of restricted stock










25



(25
)


















Issuance of new common shares


18,285,714



183



175,704























175,887Surrender of unexchanged shares


(2,657
)






























Amortization of unearned stock
    compensation














218



















218Exercise of stock options


241







4























4Exchange of preferred shares for
    common shares


3,941,115



40



41,341























41,381Vesting of restricted stock units


22,222































Treasury stock


























7,211



(76
)


(76
)Comprehensive loss:Net loss


















(31,834
)














(31,834
)Currency translation adjustments
    (related taxes estimated at nil)






















453











453Total comprehensive loss


































(31,381
)Balance December 31, 2004


24,579,255


$
246


$
306,943


$
(315
)

$
(81,941
)

$
1,777



7,211


$
(76
)

$
226,634Amortization of unearned stock
    compensation














494



















494Issuance of restricted shares










783



(783
)


















Vesting of restricted stock units


45,826































Release of surplus accrual on final
    settlement of bankruptcy claims










1,292























1,292Retirement of disputed claims shares


(16,676
)






























Exercise of stock options


40,000







361























361Repurchases of treasury stock


























14,422



(150
)


(150
)Realization of pre-emergence
    deferred tax asset










7,692























7,692Other










(37
)






















(37
)Comprehensive income:Net income


















12,301















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






















457











457Total comprehensive income


































12,758Balance December 31, 2005


24,648,405


$
246


$
317,034


$
(604
)

$
(69,640
)

$
2,234



21,633


$
(226
)

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










(604
)


604



















Amortization of unearned stock
    compensation










1,406























1,406Issuance and vesting of restricted
    and nonvested shares


49,913



3



159























162Exercise of stock options


162,003







1,673























1,673Repurchases of treasury stock


























229,986



(2,815
)


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










67























67Realization of pre-emergence
    deferred tax asset










7,899























7,899Comprehensive loss:Net loss


















(15,176
)














(15,176
)Currency translation adjustments
    (related taxes






















(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
)

$
242,114    F-5




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Years EndedDecember 31,


December 31,


December 31,2006


2005


2004($ in thousands)Operating activities:Net (loss) income

$
(15,176
)

$
12,301


$
(31,834
)Adjustments to reconcile net income
    to net cash provided by operating activities:Depreciation and amortization


36,227



30,147



27,616Impairment of long-lived assets


23,880



12,307



12,112Stock compensation expense


1,566



494



218Preferred stock dividends










9,383Loss on redemption of preferred
    stock










6,063Casualty (gain) loss


(3,128
)


(30,769
)


2,313Deferred income taxes


7,968



7,692



Minority interests


(295
)


9,588



(691
)Gain on asset dispositions


(2,961
)


(6,872
)


(9,168
)Gain on extinguishment of debt


(10,231
)






Amortization of deferred financing
    costs


1,384



942



11,210Other


78



(540
)


(125
)Changes in operating assets and
    liabilities:Accounts receivable, net of
    allowances


(581
)


(313
)


958Insurance receivable


1,696



(3,121
)


Inventories


(371
)


(526
)


(396
)Prepaid expenses and other assets


(4,331
)


(2,617
)


291Accounts payable


(575
)


58



(181
)Other accrued liabilities


565



(294
)


(1,330
)Advance deposits


(122
)


251



(487
)Net cash provided by operating
    activities


35,593



28,728



25,952Investing activities:Capital improvements


(35,787
)


(86,476
)


(37,262
)Proceeds from sale of assets, net
    of related selling costs


22,925



36,396



42,493Acquisitions of property and
    equipment










(5,363
)Withdrawals (deposits) for capital
    expenditures


9,371



15,361



(18,990
)Insurance receipts related to
    casualty claims


3,194



26,193



2,000Net decrease (increase) in
    restricted cash


1,212



(5,163
)


(2,756
)Other


(159
)


(99
)


(598
)Net cash provided by (used in)
    investing activities


756



(13,788
)


(20,476
)Financing activities:Proceeds from issuance of long term
    debt


44,954



32,200



370,000Proceeds from exercise of stock
    options and issuance of common stock


1,673



361



175,890Principal payments on long-term debt


(49,767
)


(63,612
)


(406,515
)Shares redeemed from reverse stock
    split










(5
)Preferred stock redemption










(114,043
)Purchase of treasury stock


(2,696
)


(150
)


(76
)Payments of deferred financing costs


(870
)


(913
)


(5,417
)Payments of defeasance costs


(546
)






Other


10



(37
)


Net cash (used in) provided by
    financing activities


(7,242
)


(32,151
)


19,834Effect of exchange rate changes on
    cash


(16
)


74



27Net increase (decrease) in cash and
    cash equivalents


29,091



(17,137
)


25,337Cash and cash equivalents at
    beginning of year


19,097



36,234



10,897Cash and cash equivalents at end of
    year

$
48,188


$
19,097


$
36,234Supplemental cash flow information:Cash paid during the period for:Interest, net of the amounts
    capitalized shown below

$
32,734


$
27,154


$
35,010Interest capitalized


117



2,121



800Income taxes, net of refunds


845



359



483Supplemental disclosure of non-cash
    investing and financing activities:Exchange of preferred shares for
    common stock










41,381Net non-cash debt increase
    (decrease)


10,250



1,277



3,187Equipment acquired through capital
    lease obligations










51Release of surplus accrual on final
    settlement of bankruptcy claims






1,292



Treasury stock repurchases traded,
    but not settled


119







Purchases of property and equipment
    on account


1,923



3,330



4,532    F-6




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2006
  1.
    Summary
    of Significant Accounting Policies  Description
    of Business
            Principles
    of Consolidation
    
    Melbourne Hospitality Associates, Limited Partnership (which
    owns the Crowne Plaza Melbourne, Florida)  This
    joint venture is in the form of a limited partnership, in which
    a Lodgian subsidiary serves as the general partner and has a 50%
    voting interest.
    New Orleans Airport Motel Associates, Ltd. (which owns the
    Radisson New Orleans Airport Hotel, Kenner,
    Louisiana)  This joint venture is in the form of
    a limited partnership, in which a Lodgian subsidiary serves as
    the general partner and has an 82% voting interest. F-7




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Servico Centre Associates, Ltd. (which owns the Crowne Plaza
    West Palm Beach, Florida)  This joint venture is
    in the form of a limited partnership, in which a Lodgian
    subsidiary serves as the general partner and has a 50% voting
    interest.        Inventories
      Minority
    Interests
    Property
    and Equipment
     F-8




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          For the Years EndedDecember 31, 2005


December 31, 2004Income (loss) from continuing
    operations:As reported

$
10,836


$
(27,383
)Add: Stock-based compensation
    expense as reported


302



218Deduct: Total pro forma
    stock-based employee compensation expense


(1,354
)


(1,155
)Pro forma


9,784



(28,320
)Income (loss) from discontinued
    operations:As reported


1,465



(4,451
)Add: Stock-based compensation
    expense as reported






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






Pro forma


1,465



(4,451
)Net Income (loss) attributable
    to common stock:As reported


12,301



(31,834
)Add: Stock-based compensation
    expense as reported


302



218Deduct: Total pro forma
    stock-based employee compensation expense


(1,354
)


(1,155
)Pro forma

$
11,249


$
(32,771
) F-11




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  For the Years EndedDecember 31, 2005


December 31, 2004Basic earnings per common
    shareIncome (loss) from continuing
    operations:As reported

$
0.44


$
(1.98
)Add: Stock-based compensation
    expense as reported


0.01



0.02Deduct: Total pro forma
    stock-based employee compensation expense


(0.06
)


(0.08
)Pro forma


0.40



(2.05
)Income (loss) from discontinued
    operations:As reported


0.06



(0.32
)Add: Stock-based compensation
    expense as reported






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






Pro forma


0.06



(0.32
)Net Income (loss) attributable
    to common stock:As reported


0.50



(2.30
)Add: Stock-based compensation
    expense as reported


0.01



0.02Deduct: Total pro forma
    stock-based employee compensation expense


(0.06
)


(0.08
)Pro forma

$
0.46


$
(2.37
)Diluted earnings per common
    shareIncome (loss) from continuing
    operations:As reported

$
0.44


$
(1.98
)Add: Stock-based compensation
    expense as reported


0.01



0.02Deduct: Total pro forma
    stock-based employee compensation expense


(0.05
)


(0.08
)Pro forma


0.40



(2.05
)Income (loss) from discontinued
    operations:As reported


0.06



(0.32
)Add: Stock-based compensation
    expense as reported






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






Pro forma


0.06



(0.32
)Net Income (loss) attributable
    to common stock:As reported


0.50



(2.30
)Add: Stock-based compensation
    expense as reported


0.01



0.02Deduct: Total pro forma
    stock-based employee compensation expense


(0.05
)


(0.08
)Pro forma

$
0.46


$
(2.37
)  F-12




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Revenue
    Recognition
    Foreign
    Currency Translation
    Operating
    Segments
    Use of
    Estimates
    Self-insurance
    New
    Accounting Pronouncements
   F-13




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       06-03, 06-03 06-03
  2.
    Stock-Based
    Compensation   F-14




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Issued Underthe StockIncentive Plan


TypeAvailable under the plan, less
    previously issued as of December 31, 2005


2,545,252Issued January 31, 2006


(12,413
)

restricted stockIssued January 31, 2006


(3,884
)

nonvested stockIssued March 1, 2006


(35,000
)

nonvested stockIssued June 8, 2006


(7,000
)

nonvested stockShares of restricted stock
    withheld from awards to satisfy tax withholding obligations


4,719Nonvested shares forfeited in 2006


777Options forfeited in 2006


75,578Available for issuance,
    December 31, 2006


2,568,029   Stock
    Options
      Weighted AverageStock Options


Exercise PriceBalance, December 31, 2003


157,527


$
13.92Granted


383,500



10.52Exercised


(239
)


15.21Forfeited


(14,378
)


13.42Balance, December 31, 2004


526,410


$
11.46Granted


440,000



9.29Exercised


(40,000
)


9.05Forfeited


(332,516
)


10.75Balance, December 31, 2005


593,894


$
10.41Granted






Exercised


(162,003
)


10.12Forfeited


(75,578
)


10.18Balance, December 31, 2006


356,313


$
10.60    F-15




---



##### Table of Contents



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


Options ExercisableWeighted Average


Weighted





Weighted Average


WeightedRemaining Life


Average





Remaining Life


AverageRange of Prices

Number


(in years)


Exercise Price


Number


(in Years)


Exercise Price$7.83 to $9.39


166,155



8.4


$
9.05



33,024



8.3


$
9.05$9.40 to $10.96


131,009



7.6


$
10.49



64,648



7.5


$
10.50$10.97 to $15.66


59,149



6.7


$
15.21



59,149



6.7


$
15.21356,313



7.8


$
10.60



156,821



7.3


$
11.97Expected to vest


302,866



7.9


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

$
1,069Aggregate intrinsic value of stock
    options expected to vest

$
897Aggregate intrinsic value of stock
    options exercisable

$
255     Year EndedDecember 31, 2005


December 31, 2004Expected life of option


10 years



10 yearsRisk free interest rate


4.56
%


4.09
%Expected volatility


22.80
%


55.74
%Expected dividend yield






       Year EndedDecember 31, 2005


December 31, 2004Weighted average fair value of
    options granted

$
4.21


$
7.32Total number of options granted


440,000



383,500Total fair value of all options
    granted

$
1,852,400


$
2,807,220   Restricted
    Stock
   F-16




---



##### Table of Contents



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


Fair ValueBalance, December 31, 2005





$
Granted


12,413



12.88Withheld to satisfy tax obligations


(4,719
)


12.88Balance, December 31, 2006


7,694


$
12.88     Nonvested
    Stock
          Weighted AverageGrant DateNonvested Stock


Fair ValueBalance, December 31, 2003


200,000


$
3.00Adjustment for 3:1 reverse stock
    split


(133,333
)


9.00Vested


(22,222
)


9.00Balance, December 31, 2004


44,445


$
9.00Vested


(44,444
)


9.00Stock lost due to reverse stock
    split


(1
)


9.00Granted


75,000



10.44Balance, December 31, 2005


75,000


$
10.44Granted


45,884



12.63Forfeited


(777
)


12.88Vested


(37,500
)


10.44Balance, December 31, 2006


82,607


$
11.63  F-17




---



##### Table of Contents



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


Grant DateStock Units


Fair ValueBalance, December 31, 2003





$
Granted


1,382



18.09Balance, December 31, 2004


1,382


$
18.09Units converted to common stock


(1,382
)


18.09Balance, December 31, 2005





$
       Unrecognized


Weighted-AverageCompensation


AmortizationType of Award

Expense ($000s)


Period (in years)Stock Options

$
694



1.07Nonvested Stock


564



1.60Total

$
1,258



1.49     Income from continuing operations

$
908Income before income taxes


908Net income


556Basic earnings per share


0.023Diluted earnings per share


0.023     Twelve Months Ended December 31, 2006Compensation


Income TaxType of Award

Expense


Benefit($ in thousands)Stock Options

$
908


$
352Nonvested Stock


160



62Restricted Stock


498



193Total

$
1,566


$
607  F-18




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Discontinued
    Operations    
    On January 29, 2004, the Company sold the Holiday Inn
    Hotel, a 246 room hotel, located in Dallas, TX.
    On February 5, 2004, the Company sold the Holiday Inn
    Hotel, a 135 room hotel, located in Baltimore, MD.
    On February 12, 2004, the Company sold the Holiday Inn
    Hotel, a 152 room hotel, located in Syracuse, NY.
    On February 25, 2004, the Company sold the Holiday Inn
    Hotel, a 214 room hotel, located in Fort Mitchell, KY.
    On March 31, 2004, the Company sold the Holiday Inn Express
    Hotel, a 214 room hotel, located in Pensacola, FL.
    On April 7, 2004, the Company sold the Downtown Plaza
    Hotel, a 243 room hotel located in Cincinnati, OH.
    On April 15, 2004, the Company sold the Courtyard Hotel, a
    154 room hotel, located in Revere, MA
    On May 7, 2004, the Company sold the Mayfair House Hotel, a
    179 room hotel, located in Miami, FL.
    On July 22, 2004, the Company sold the Holiday Inn Hotel, a
    261 room hotel, located in Grand Island, NY.
    On August 18, 2004, the Company sold a parcel of land
    located in Fayetteville, NC.
    On September 22, 2004, the Company sold a parcel of land
    located in Ontario, CA.
    On December 13, 2004, the Company sold the Holiday Inn
    Hotel, a 105 room hotel, located in Florence, KY.
    On December 20, 2004, the Company sold the Holiday Inn
    Hotel, a 173 room hotel, located in Memphis, TN.      
    On January 20, 2005, the Company sold the Four Points
    Hotel, a 189 room hotel, located in Niagara Falls, NY.
    On February 17, 2005, the Company sold the Holiday Inn
    Hotel, a 147 room hotel, located in Morgantown, WV.
    On March 31, 2005, the Company sold the Holiday Inn Hotel,
    a 177 room hotel, located in Pittsburgh, PA.
    On June 1, 2005, the Company sold the Holiday Inn Hotel, a
    210 room hotel, located in Austin, TX.
    On July 7, 2005, the Company sold the Holiday Inn Hotel, a
    390 room hotel, located in St. Louis, MO.
    On July 15, 2005, the Company sold the Holiday Inn Select
    Hotel, a 397 room hote,l located in Niagara Falls, NY.
    On September 15, 2005, the Company sold the Holiday Inn
    Express Hotel, a 141 room hotel, located in Gadsden, AL.
    On September 16, 2005, the Company sold the Holiday Inn
    Hotel, a 422 room hotel, located in Rolling Meadows, IL. F-19




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       
    On March 9, 2006, the Company sold the Fairfield Inn Hotel,
    a 105 room hotel located in Jackson, TN.
    On April 3, 2006, the Company sold a land parcel located in
    Mt. Laurel, NJ.
    On April 25, 2006, the Company sold the Holiday Inn Hotel,
    a 146 room hotel located in Pittsburgh, PA.
    On October 24, 2006, the Company sold the Holiday Inn
    Hotel, a 167 room hotel located in Valdosta, GA.
    On October 24, 2006, the Company sold the Azalea Inn Hotel,
    a 108 room hotel located in Valdosta, GA.
    On November 28, 2006, the Company sold its rights to the
    ground lease of the former Holiday Inn Hotel located in Jekyll
    Island, GA.
    On December 1, 2006, the Company sold the Quality Hotel, a
    205 room hotel located in Metairie, LA.        
    $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; F-20




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    $0.1 million on the Azalea Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel;
    $0.7 million on the University Plaza Bloomington, IN, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.3 million on the Ramada Plaza Macon, GA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less cost to sell;
    $2.1 million on the Holiday Inn University Mall, FL, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.8 million on the Holiday Inn Express Pensacola, FL,
    which was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $0.8 million on the Holiday Inn Greentree, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.2 million on the Holiday Inn York, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.9 million on the Holiday Inn Lancaster, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $6.4 million on the Holiday Inn Lansing, MI, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.6 million on the Holiday Inn Clarksburg, WV, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell; and
    $0.1 million on the Holiday Inn Jekyll Island, GA to record
    the disposal costs of furniture, fixtures and equipment incurred
    during the closing of the hotel.    
    $1.8 million on the Azalea Inn Valdosta, GA to reduce the
    carrying value to estimated selling price;
    $1.7 million on the Holiday Inn Rolling Meadows, IL to
    reflect the lowered selling price and to record the final
    disposition of the hotel;
    $1.7 million on the Holiday Inn Sheffield, AL to reduce the
    carrying value to estimated selling price;
    $1.6 million on the Holiday Inn Lawrence, KS to reflect the
    reduced fair value appraisal;
    $1.3 million on the Holiday Inn St. Louis, MO to
    reflect the reduced selling price of the hotel;
    $1.1 million on the Park Inn Brunswick, GA, to write-off
    the capital improvements made on this property related to the
    franchise conversion that did not result in an increase in the
    fair value of this hotel;
    $0.9 million on the Holiday Inn Hamburg, NY, as the
    undiscounted future cash flows were less than the assets
    carrying value and the resulting broker opinion required a
    write-down of the carrying value of the asset to its fair value;
    $0.4 million on the land parcel in Mt. Laurel, NJ to
    reflect the lowered estimated selling price of the land;
    $0.3 million on the Holiday Inn Express Gadsden, AL to
    reflect the estimated selling costs as this hotel was identified
    for sale in January 2005, to reflect the write-off of capital
    improvements spent on this hotel for F-21




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  franchisor compliance that did not add incremental value or
    revenue generating capacity to the property, and to record the
    final disposition of the hotel;  
    $0.3 million on the Holiday Inn Morgantown, WV to reflect
    the reduced selling price of the hotel and the additional
    charges to dispose of the hotel in February 2005; and
    $0.1 million on the Holiday Inn McKnight, PA as the hotel
    was identified for sale in 2005 and its carrying value was
    adjusted to the estimated selling price less selling costs.    
    $3.7 million on the Park Inn Brunswick, GA, which was
    converted from a Holiday Inn, as this hotel lost the business of
    a significant military group contract and the conversion of this
    hotel to a Park Inn was not expected to improve operating
    results;
    $1.7 million on the Holiday Inn Rolling Meadows, IL to
    record the difference between the estimated selling price and
    the carrying value of this hotel consistent with an offer
    received on the hotel;
    $1.1 million on the Holiday Inn Express Gadsden, AL as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets carrying value. The
    estimated selling price of this hotel was negatively impacted by
    its franchise agreement expiring in August 2005 and the
    franchisor indicating that it would not renew the agreement;
    $1.0 million on the Holiday Inn Austin (South), TX to
    reflect a reduction in the estimated selling price due to
    feedback from potential buyers that this hotel had limited
    future franchise options due to its exterior corridors;
    $0.9 million on the Holiday Inn St. Louis North, MO as
    this hotel was identified for sale in January 2005 and the
    estimated selling price was less than the assets
    previously adjusted carrying value;
    $0.7 million on the Holiday Inn Memphis, TN to reflect the
    reduced selling price and additional charges to dispose of this
    hotel in December 2004;
    $0.6 million on the Holiday Inn Lawrence, KS to reflect the
    continued declining financial performance of this hotel which
    was in need of a major renovation; when management was notified
    that the franchise agreement would not be renewed, it was
    determined that renovations were not economically justifiable;
    $0.6 million on the Quality Hotel & Conference
    Center Metairie, LA as capital improvements were spent on health
    and safety items that added no incremental market value or
    revenue generating capacity at this hotel, resulting in the
    recording of impairment to reduce the assets carrying
    value to the fair value;
    $0.5 million on the Downtown Plaza Hotel Cincinnati, OH to
    reflect the lowered estimated selling price of the hotel and the
    loss recorded on sale of the hotel in April 2004;
    $0.4 million on the Holiday Inn Morgantown, WV as capital
    improvements were spent on this hotel for franchise compliance
    that did not add incremental value or revenue generating
    capacity to the property;
    $0.4 million on the Holiday Inn Florence, KY, primarily
    related to disposal costs incurred on the sale of the hotel in
    December 2004; and
    $0.1 million on the Holiday Inn Express Pensacola, FL to reflect
    the loss recorded on sale of this hotel in March 2004.   F-22




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Clarion Charleston, SC;
    Clarion Louisville, KY
    Crowne Plaza Cedar Rapids, IA;
    Fairfield Inn Augusta, GA;
    Holiday Inn Clarksburg, WV;
    Holiday Inn Fairmont, WV;
    Holiday Inn Frederick, MD;
    Holiday Inn Fort Wayne, IN;
    Holiday Inn Greentree, PA;
    Holiday Inn Hamburg, NY;
    Holiday Inn Jamestown, NY;
    Holiday Inn Lancaster East, PA;
    Holiday Inn Lansing, MI;
    Holiday Inn Pensacola, FL;
    Holiday Inn Sheffield, AL;
    Holiday Inn St Paul, MN;
    Holiday Inn Winter Haven, FL;
    Holiday Inn York, PA;
    Holiday Inn Express Dothan, AL;
    Park Inn Brunswick, GA;
    Quality Inn Dothan, AL;
    Ramada Plaza Macon, GA;
    Ramada Inn North Charleston, SC;
    University Plaza Bloomington, IN; and,
    Vermont Maple Inn Colchester, VT F-23




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31, 2006


December 31, 2005($ in thousands)Property and equipment, net

$
83,462


$
13,796Other assets


5,975



1,070Assets held for sale

$
89,437


$
14,866Other liabilities

$
10,630


$
3,346Long-term debt


57,721



1,264Liabilities related to assets held
    for sale

$
68,351


$
4,610     December 31, 2006


December 31, 2005


December 31, 2004($ in thousands)Total revenues

$
89,986


$
117,465


$
143,119Total operating expenses
    (excluding impairment)


(82,982
)


(104,891
)


(128,489
)Impairment of long-lived assets


(23,122
)


(11,062
)


(11,700
)Interest income and other


11



308



51Interest expense


(5,856
)


(7,444
)


(16,696
)Business interruption proceeds


754







Gain on asset disposition


2,961



6,872



9,168Gain on extinguishment of debt, net


10,231







Benefit for income taxes


3,108



313



Minority interest in loss (income)






(96
)


96(Loss) income from discontinued
    operations

$
(4,909
)

$
1,465


$
(4,451
)   held-for-sale
    4.
    Accounts
    Receivable    December 31, 2006


December 31, 2005($ in thousands)Trade accounts receivable

$
7,362


$
8,205Allowance for doubtful accounts


(277
)


(1,101
)Other receivables


319



950$
7,404


$
8,054  F-24




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Prepaid
    Expenses and Other Current Assets    December 31, 2006


December 31, 2005($ in thousands)Deposits for property taxes

$
6,956


$
7,552Prepaid insurance


5,379



3,244Lender-required insurance deposits


5,750



3,489Deposits and other prepaid expenses


4,365



5,816$
22,450


$
20,101   6.
    Property
    and Equipment, net    Useful Lives


December 31,


December 31,(years)


2006


2005($ in thousands)Land





$
52,119


$
73,254Buildings and improvements


10  40



394,314



440,973Property and equipment


3  10



125,018



116,259China, glass and silverware






1,656



2,144573,107



632,630Less accumulated depreciation






(86,651
)


(80,901
)Construction in progress






566



55,133$
487,022


$
606,862     7.
    Other
    Assets    December 31, 2006


December 31, 2005($ in thousands)Deferred financing costs

$
3,167


$
4,258Deferred franchise fees


1,430



2,001Utility and other deposits


555



495Linen inventory


672



837$
5,824


$
7,591    F-25




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##### Table of Contents



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


2007


2008


2009


2010


2011


After 2011Deferred financing costs

$
3,167


$
1,282


$
1,243


$
530


$
103


$
9


$
Deferred franchise fees


1,430



210



174



164



158



154



570$
4,597


$
1,492


$
1,417


$
694


$
261


$
163


$
570   8.
    Other
    Accrued Liabilities    December 31, 2006


December 31, 2005($ in thousands)Salaries and related costs

$
5,584


$
6,358Self-insurance loss accruals


11,502



12,436Property and sales taxes


5,715



7,192Professional fees


727



883Accrued franchise fees


1,024



1,004Accrued interest


2,089



2,631Other


1,083



1,024$
27,724


$
31,528   9.
    Long-Term
    Liabilities   F-26




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2006


December 31, 2005Number


Property, Plant


Long-Term


Long-Termof Hotels


and Equipment, Net


Liabilities


Liabilities


Interest Rates at December 31, 2006Refinancing DebtMerrill Lynch Mortgage Lending,
    Inc.  Floating


15


$
72,173


$
58,118


$
67,546


LIBOR plus 3.40%; capped at 9.4%Merrill Lynch Mortgage Lending,
    Inc.  Fixed


33



319,085



239,383



252,377


6.58%Merrill Lynch Mortgage Lending,
    Inc.  Total


48



391,258



297,501



319,923Other FinancingsComputer Share Trust Company of
    Canada


1



15,579



7,551



7,838


7.88%Column Financial, Inc.














10,337Lehman Brothers Holdings, Inc.


4



45,275



15,194



22,398


$8,726 at 9.40%; $6,468 at 8.90%JP Morgan Chase Bank














10,064Wachovia


4



36,320



36,081



13,173


$9,845 at 6.03%; $3,115 at 5.78%;
    23,122 at 6.04%IXIS


4



36,701



40,500



19,000


$19,000 at LIBOR plus 2.90%, capped
    at 8.4%; $21,500 at LIBOR plus 2.95%, capped at 8.45%Column Financial, Inc.














8,146Total  other financing


13



133,875



99,327



90,95661



525,133



396,828



410,879


7.14%(1)Long-term
    liabilities  otherTax notes issued pursuant to our
    Joint Plan of Reorganization










1,263



2,220Other










1,038



1,151







2,301



3,371Property, plant and
    equipment  unencumbered


8



45,351







69



570,484



399,129



414,250Held for sale


(25
)


(83,462
)


(60,271
)


(1,287
)Total December 31, 2006(2)


44


$
487,022


$
338,858


$
412,963     (1)
    
    The 7.14% in the table above represents the weighted average
    annualized cost of debt at December 31, 2006.(2)
    
    Long term debt obligations at December 31,2006 and
    December 31, 2005 include the current portion.   F-27




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Merrill
    Lynch Mortgage Lending, Inc. Debt
  30-day
         F-28




---



##### Table of Contents



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








Maturities2006


2007


2008


2009


2010


2011


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

$
58,118


$
822


$
57,296


$



$



$



$
Merrill Lynch Mortgage Lending,
    Inc.  Fixed


239,383



4,470



4,743



230,170











Total  Merrill Lynch
    Mortgage Lending, Inc.


297,501



5,292



62,039



230,170











Other Financings:Computer Share Trust Company of
    Canada


7,551



7,551



















Lehman Brothers Holdings,
    Inc.


15,194



15,194



















Wachovia


36,081



656



691



740



3,633



30,361



IXIS


40,500



19,224



21,276















Total  Other Financing


99,326



42,625



21,967



740



3,633



30,361



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


1,263



615



616



32











Other Long-term Liabilities


1,039



575



194



219



45



6



2,302



1,190



810



251



45



6



Total Debt Obligations


399,129



49,107



84,816



231,161



3,678



30,367



Less: Debt Obligations 
    Discontinued


60,271



2,550



39,677



18,023



18



3



Total Debt Obligations 
    Continued

$
338,858


$
46,557


$
45,139


$
213,138


$
3,660


$
30,364


$
   10.
    Stockholders
    Equity  12.25%
    Cumulative Preferred Shares Subject to Mandatory
    Redemption
    2004
    Reverse Stock Split
  one-for-three
   F-31




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Treasury
    Stock
        Class A
    and Class B Warrants
        11.
    Income
    Taxes    2006


2005Current


Deferred


Total


Current


Deferred


Total($ in thousands)Federal

$
264


$
6,839


$
7,103


$



$
7,057


$
7,057State and Local


268



966



1,234



362



635



997Foreign


196







196



162







162728



7,805



8,533



524



7,692



8,216Less: discontinued operations






(3,108
)


(3,108
)






(313
)


(313
)Continuing operations

$
728


$
10,913


$
11,641


$
524


$
8,005


$
8,529  F-32




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005Total


Current


Non-Current


Total


Current


Non-Current($ in thousands)Property and equipment

$
(11,143
)

$



$
(11,143
)

$
(12,703
)

$



$
(12,703
)Net operating loss carryforwards
    (NOLs)


123,722







123,722



122,220







122,220Loan costs


573







573



567







567Legal and workers
    compensation reserves


3,760



3,760







4,048



4,048



AMT and FICA credit carryforwards


2,624







2,624



2,360







2,360Other operating accruals


2,289



2,289







2,158



2,158



Other


(407
)






(407
)


(450
)






(450
)Total


121,418



6,049



115,369



118,200



6,206



111,994Less: valuation allowance


(121,418
)


(6,049
)


(115,369
)


(118,200
)


(6,206
)


(111,994
)$



$



$



$



$



$
     2006


2005($ in thousands)Federal income tax (benefit)
    provision at statutory federal rate

$
(2,259
)

$
6,974State income tax (benefit)
    provision, net


(319
)


985Non-deductible items


(203
)


95Foreign


196Change in valuation allowance


11,118



1628,533



8,216Less discontinued operations


(3,108
)


(313
)Provision (benefit) for income
    taxes

$
11,641


$
8,529   SOP 90-7 SOP 90-7.
 F-33




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   SOP 90-7,
    12.
    Related
    Party Transactions  Preferred
    Share Exchange
  and/or
  Consultancy
   F-34




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Earnings
    Per Share    2006


2005


2004($ in thousands, except per share data)Basic and diluted earnings per
    share:Numerator:Income (loss) from continuing
    operations

$
(10,267
)

$
10,836


$
(27,383
)Income (loss) from discontinued
    operations


(4,909
)


1,465



(4,451
)Net income (loss) attributable to
    common stock

$
(15,176
)

$
12,301


$
(31,834
)Denominator:Denominator for basic earnings per
    share  weighted average shares


24,617



24,576



13,817Denominator for diluted earnings
    per share  weighted average shares


24,617



24,630



13,817Basic earnings (loss) per common
    share:Income (loss) from continuing
    operations

$
(0.42
)

$
0.44


$
(1.98
)Income (loss) from discontinued
    operations


(0.20
)


0.06



(0.32
)Net income (loss) attributable to
    common stock

$
(0.62
)

$
0.50


$
(2.30
)Diluted earnings (loss) per common
    share:Income (loss) from continuing
    operations

$
(0.42
)

$
0.44


$
(1.98
)Income (loss) from discontinued
    operations


(0.20
)


0.06



(0.32
)Net income (loss) attributable to
    common stock

$
(0.62
)

$
0.50


$
(2.30
)   No. D-62,
       F-35




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   14.
    Commitments
    and Contingencies  Franchise
    Agreements and Capital Expenditures
    2006


2005


2004($ in thousands)Continuing operations

$
18,547


$
15,578


$
14,863Discontinued operations


6,996



8,066



9,498$
25,543


$
23,644


$
24,361       
    Two hotels are not in compliance with the franchise agreements,
    although the Company has not received formal notices of
    non-compliance from the franchisors.  
    One hotel is expected to receive a formal notice of
    non-compliance due to substandard quality assurance evaluation
    scores. The Company is currently in the planning and diligence
    phase of renovation. The Company anticipates the planned
    renovation will remedy this instance of non-compliance.
    The other hotel, which is held for sale, is expected to receive
    an extension provided the Company completes certain work
    required by the franchisor. The Company is currently completing
    this work.  
    Eight hotels are in default of the franchise agreements.  
    Three of these hotels are held for sale. One hotel is in default
    of the franchise agreement for failure to complete the Property
    Improvement Plan (PIP). This hotel has not completed the
    renovation of the commercial and exterior areas, although the
    guest rooms were completely renovated in 2005. Although likely,
    the Company has not received a notice of default regarding the
    second hotel. The Company expects to receive an extension of the
    franchise agreement for the third hotel provided the Company
    completes certain work required by the franchisor. The Company
    is currently completing this work.
    One hotel is in default of the franchise agreement for failure
    to complete a PIP. The Company has met with the franchisor and
    is in the planning and diligence phase of renovation. F-36




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Four hotels are in default due to substandard guest satisfaction
    scores. The Company received a default notice on one of these
    hotels in February 2007 and intends to address the default
    through operational improvements. The Company has received
    default notices for the remaining three hotels and does not
    anticipate curing the defaults by the required termination
    dates. However, the Company expects to receive extensions from
    the franchisors, which management anticipates will enable the
    Company to improve these scores.  
    Three hotels (one of which is held for sale) are currently
    meeting the requirements to cure the deficiencies by their
    respective cure dates. The Company expects to receive a cure
    letter for one of the hotels shortly and to earn a clean
    slate letter for the remaining two hotels in August 2007
    and August 2009, respectively.            
    multiple franchise agreement defaults and the continuance
    thereof beyond all notice and grace periods for hotels whose
    allocated loan amounts total 10% or more of the outstanding
    principal amount of such Refinancing Debt; F-37




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    with regards to the Merrill Lynch Mortgage floating rate
    refinancing debt (Floating Rate Debt), either the
    termination of franchise agreements for more than two properties
    or the termination of franchise agreements for hotels whose
    allocated loan amounts represent more than 5% of the outstanding
    principal amount of the floating rate debt, and such hotels
    continue to operate for more than five consecutive days without
    being subject to replacement franchise agreements;
    with regards to the Merrill Lynch Mortgage fixed rate
    refinancing debt (Fixed Rate Debt), either the
    termination of franchise agreements for more than one property
    or the termination of franchise agreements for hotels whose
    allocated loan amounts represent more than 5% of the outstanding
    principal amount of the fixed rate loan, and such hotels
    continue to operate for more than five consecutive days without
    being subject to replacement franchise agreements; or
    a franchise termination for any hotel currently subject to a
    franchise agreement that remains without a franchise agreement
    for more than six months.        Letters
    of Credit
    Self-insurance
      Casualty
    gains (losses), net and business interruption
    insurance
   F-38




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ramp-up
              Litigation
   F-39




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Operating
    Leases
    2006


2005


2004($ in thousands)Continuing operations

$
2,974


$
3,213


$
2,288Discontinued operations


539



557



565Total operations

$
3,513


$
3,769


$
2,853     2007

$
3,4602008


3,4442009


3,4662010


3,4922011


3,1502012 and thereafter


68,472$
85,484   15.
    Employee
    Retirement Plans    2006


2005


2004($ in thousands)Continuing operations

$
151


$
178


$
203Discontinued operations










$
151


$
178


$
203   1/1/07
 F-40




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005


2004($ in thousands)Continuing operations

$
563


$
583


$
527Discontinued operations


128



163



209$
691


$
746


$
736   16.
    Subsequent
    Events         F-41




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##### Table of Contents



EXHIBIT
    INDEX
   ExhibitNumber

Description2
.1

Disclosure Statement for Joint
    Plan of Reorganization of Lodgian, Inc., et al(other
    than the CCA Debtors), Together with the Official Committee of
    Unsecured Creditors under Chapter 11 of the Bankruptcy Code,
    dated September 26, 2002) (Incorporated by reference to Exhibit
    10.6 to the Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2
.2

First Amended Joint Plan of
    Reorganization of Lodgian, Inc., et al(Other than CCA
    Debtors), Together with the Official Committee of Unsecured
    Creditors under Chapter 11 of the Bankruptcy Code, dated
    September 26, 2002) (Incorporated by reference to Exhibit 10.7
    to the Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2
.3

Order Confirming First Amended
    Joint Plan of Reorganization of Lodgian, Inc., et alissued on November 5, 2002 by the United States Bankruptcy
    Curt for the Southern District of New York (Incorporated by
    reference to Exhibit 10.8 to the Companys Annual Report
    for the period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).2
.4

Disclosure Statement for Joint
    Plan of Reorganization of Impac Hotels II, L.L.C. and Impac
    Hotels III, L.L.C. Together with the Official Committee of
    Unsecured Creditors Under Chapter 11 of the Bankruptcy Code
    (Incorporated by reference to Exhibit 10.13.1 to the
    Companys Annual Report for the period ended December 31,
    2003 (File No. 1-14537), filed on March 9, 2004).2
.5

Joint Plan of Reorganization of
    Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. Together
    with the Official Committee of Unsecured Creditors under Chapter
    11 of the Bankruptcy Code (Incorporated by reference to Exhibit
    10.13.2 to the Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on March 9, 2004).2
.6

Order Confirming Joint Plan of
    Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III,
    L.L.C. Together with the Official Committee of Unsecured
    Creditors under Chapter 11 of the Bankruptcy Code (Incorporated
    by reference to Exhibit 10.13.3 to the Companys Annual
    Report for the period ended December 31, 2003 (File No.
    1-14537), filed on March 9, 2004).2
.7

Post Confirmation Order and Notice
    for Joint Plan of Reorganization of Impac Hotels III, L.L.C.
    Together with the Official Committee of Unsecured Creditors
    under Chapter 11 of the Bankruptcy Code (Incorporated by
    reference to Exhibit 10.13.4 to the Companys Annual Report
    for the period ended December 31, 2003 (File No. 1-14537), filed
    on March 9, 2004).3
.1

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

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

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

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

Class B Warrant Agreement, dated
    as of November 25, 2002, between Lodgian, Inc. and Wachovia
    Bank, N.A. (Incorporated by reference to Exhibit 10.10 to the
    Companys Annual Report for the period ended December 31,
    2003 (File No. 1-14537), filed on March 9, 2004).4
.4

Registration Rights Agreement,
    dated as of November 25, 2002, between Lodgian, Inc. and the
    other signatories thereto (Incorporated by reference to Exhibit
    10.11 to the Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on March 9, 2004).4
.5

Preferred Share Exchange
    Agreement, dated June 22, 2004, by and among Lodgian, Inc. and
    the record and/or beneficial stockholders as signatories thereto
    (Incorporated by reference to Exhibit 10.9 to the Companys
    Quarterly Report for the period ended June 30, 2004 (File No.
    1-14537), filed on August 16, 2004).




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##### Table of Contents



ExhibitNumber

Description4
.6

Registration Rights Agreement,
    dated June, dated June 22, 2004, by and among Lodgian, Inc. and
    the signatories thereto (Incorporated by reference to Exhibit
    10.10 to the Companys Quarterly Report for the period
    ended June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).10
.1

Loan and Security Agreement
    (Floating Rate), dated as of June 25, 2004, by and between the
    Borrowers listed on Schedule 1 thereto and Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to Exhibit
    10.1.1 to the Companys Quarterly Report for the period
    ended June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).10
.2

Loan Modification Agreement
    (Floating Rate) between Merrill Lynch Mortgage Lending, Inc. and
    the Borrowers identified on the signature pages thereto dated
    April 29, 2005 (Incorporated by reference to Exhibit 10.40 to
    the Companys Quarterly Report for the period ended March
    31, 2005 (File No. 1-14537), filed with the Commission on May
    10, 2005.10
.3

Promissory Note A in the original
    amount of $72,000,000.00, dated as of June 25, 2004, by the
    Borrowers listed on the signature pages thereto in favor of
    Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference
    to Exhibit 10.1.2 to the Companys Quarterly Report for the
    period ended June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).10
.4

Promissory Note B in the original
    amount of $38,000,000, dated as of June 25, 2004, by the
    Borrowers listed on the signature pages thereto in favor of
    Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference
    to Exhibit 10.1.3 to the Companys Quarterly Report for the
    period ended June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).10
.5

Loan and Security Agreement (Fixed
    Rate #1), dated as of June 25, 2004, 2004, by and between the
    Borrowers listed on Schedule 1 thereto and Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to Exhibit
    10.2.1 to the Companys Quarterly Report for the period
    ended June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).10
.6

Promissory Note in the original
    amount of $63,801,000.00, dated as of June 25, 2004, by the
    Borrowers listed on the signature pages thereto in favor of
    Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference
    to Exhibit 10.2.2 to the Companys Quarterly Report for the
    period ended June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).10
.7

Loan and Security Agreement (Fixed
    Rate #2), dated as of June 25, 2004, by and between the
    Borrowers listed on Schedule 1 thereto and Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to Exhibit
    10.3.1 to the Companys Quarterly Report for the period
    ended June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).10
.8

Promissory Note in the original
    amount of $67,864,000.00, dated as of June 25, 2004, by the
    Borrowers listed on the signature pages thereto in favor of
    Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference
    to Exhibit 10.3.2 to the Companys Quarterly Report for the
    period ended June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).10
.9

Loan and Security Agreement (Fixed
    Rate #3), dated as of June 25, 2004, by and between the
    Borrowers listed on Schedule 1 thereto and Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to Exhibit
    10.4.1 to the Companys Quarterly Report for the period
    ended June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).10
.10

Promissory Note in the original
    amount of $66,818,500.00, dated as of June 25, 2004, by the
    Borrowers listed on the signature pages thereto in favor of
    Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference
    to Exhibit 10.4.2 to the Companys Quarterly Report for the
    period ended June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).10
.11

Loan and Security Agreement (Fixed
    Rate #4), dated as of June 25, 2004, by and between the
    Borrowers listed on Schedule 1 thereto and Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to Exhibit
    10.5.1 to the Companys Quarterly Report for the period
    ended June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).10
.12

Loan Modification Agreement (Fixed
    Rate #4) dated October 17, 2005, by and between Merrill Lynch
    Mortgage Lending, Inc. and certain Lodgian, Inc. subsidiaries
    (Incorporated by reference to Exhibit 99.1 to Companys
    Current Report on Form 8-K. (File No. 1-14537), filed on
    October 21, 2005).10
.13

Promissory Note in the original
    amount of $61,516,500.00, dated as of June 25, 2004, 2004, by
    the Borrowers listed on the signature pages thereto in favor of
    Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference
    to Exhibit 10.5.2 to the Companys Quarterly Report for the
    period ended June 30, 2004 (File No. 1-14537), filed
    on August 16, 2004).




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##### Table of Contents



ExhibitNumber

Description10
.14

Employment Agreement between
    Lodgian, Inc. and Daniel E. Ellis, dated May 2, 2004
    (Incorporated by reference to Exhibit 10.4 to the Companys
    Quarterly Report for the period ended March 31, 2004
    (File No. 1-14537), filed with the Commission on May 14,
    2004).10
.15

Participation Form for Daniel E.
    Ellis under the Lodgian, Inc. Executive Incentive Plan
    (Incorporated by reference to Exhibit 10.2 to the Companys
    Current Report on Form 8-K (File No. 1-14537), filed with
    the Commission on February 6, 2006).10
.16

Employment Agreement between
    Lodgian, Inc. and Samuel J. Davis, dated May 14, 2004
    (Incorporated by reference to Exhibit 10.19 to Amendment No. 2
    to the Companys Registration Statement on Form S-1
    (Registration Number 333-113410), filed with the Commission on
    June 4, 2004).10
.17

Agreement for Consulting Services
    between Lodgian, Inc. and Linda Borchert Philp dated December
    19, 2005 (Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K (File No.
    1-14537), filed with the Commission on December 22, 2005).10
.18

Release Agreement between Lodgian,
    Inc. and Linda Borchert Philp dated December 16, 2005
    (Incorporated by reference to Exhibit 10.2 to the Companys
    Current Report on Form 8-K (File No. 1-14537), filed with
    the Commission on December 22, 2005).10
.19

Executive Employment Agreement
    between Edward J. Rohling and Lodgian, Inc., dated July 12, 2005
    (Incorporated by reference to Exhibit 10.35 to the
    Companys Quarterly Report for the period ended
    June 30, 2005 (File No. 1-14537), filed with the Commission
    on August 9, 2005).10
.20

Restricted Stock Award Agreement
    between Edward J. Rohling and Lodgian, Inc., dated July 15, 2005
    (Incorporated by reference to Exhibit 10.36 to the
    Companys Quarterly Report for the period ended
    June 30, 2005 (File No. 1-14537), filed with the Commission
    on August 9, 2005).10
.21

Employment Agreement between
    Lodgian, Inc. and James A. MacLennan dated March 1, 2006
    (Incorporated by reference to Exhibit 10.1 to the Companys
    Current Report on Form 8-K (File No. 1-14537), filed with
    the Commission on March 3, 2006).10
.22

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
.23

Participation Form for James A.
    MacLennan under the Lodgian, Inc. Executive Incentive Plan
    (Incorporated by reference to Exhibit 10.3 to the Companys
    Current Report on Form 8-K (File No. 1-14537), filed
    with the Commission on March 3, 2006).10
.24

2002 Amended and Restated Stock
    Incentive Plan of Lodgian, Inc. (Incorporated by reference to
    Exhibit 10.5 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1 (File No. 333-1113410),
    filed on June 6, 2004).10
.25

First Amendment to the Amended and
    Restated 2002 Stock Incentive Plan of Lodgian, Inc. dated
    April 28, 2005 (Incorporated by reference to Exhibit
    10.34 to the Companys Quarterly Report for the period
    ended March 31, 2005 (File No. 1-14537), filed with the
    Commission on May 10, 2005).10
.26

Form of Stock Option Award
    Agreement (Incorporated by reference to Exhibit 10.37 to the
    Companys Annual Report for the period ended December 31,
    2004 (File No. 1-14537), filed with the Commission on March
    23, 2005).10
.27

Form of Restricted Stock Award
    Agreement (Incorporated by reference to Exhibit 10.40 to the
    Companys Quarterly Report for the period ended June 30,
    2005 (File No. 1-14537), filed with the Commission on
    August 9, 2005).10
.28

Lodgian, Inc. 401(k) Plan, As
    Amended and Restated Effective September 1, 2003 (Incorporated
    by reference to Exhibit 20.1.1 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1 (File No.
    333-113410), filed on June 6, 2004).10
.29

Executive Employment Agreement
    between Mark D. Linch and Lodgian, Inc., dated June 8, 2006
    (Incorporated by reference to Exhibit 10.1 to the Companys
    Current Report on Form 8-K
    (File No. 1-14537),
    filed with the Commission on June 14, 2006).10
.30

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




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##### Table of Contents



ExhibitNumber

Description10
.31

Form of Restricted Stock Award
    Agreement for Employees (Incorporated by reference to Exhibit
    10.1 to the Companys Current Report on Form 8-K/A
    (File No. 1-14537), filed with the Commission on March 6,
    2007.10
.32

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, 2007.31
.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.