##### 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 1934.    
|          
|           |  | For the fiscal year ended December 31,
    2002                                              
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|          
|           |  | For the transition period
    from          to                                               

Commission file no. 1-14537



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Lodgian, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                                |  |                                         
|----------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                        |  | 52-2093696                              
|(State or other jurisdiction of
    incorporation or organization)                              |  | (I.R.S. Employer
    Identification No.)
|                                                                                               
|3445 Peachtree Road N.E., Suite 700
    Atlanta, GA(Address of principal executive
    offices) |  | 30326(Zip Code)                         

Registrants telephone number, including
area code:

(404) 364-9400


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

|                                             |  |                                          
|-------------------------------------------- |  | -----------------------------------------
|Title of Each Class                          |  | Name of Each Exchange on Which Registered
|                                             |  |                                          
|Common Stock, $.01 par value per share       |  | American Stock Exchange                  
|Preferred Stock, $.01 par value per share    |  | American Stock Exchange                  
|(initial liquidation value of $25 per share) |  |                                          

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

Title of Each Class





Class A warrants


Class B warrants


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for
the past
90 days.    Yes þ         No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K
(Section 229.405 of this chapter) is not contained herein
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or
any amendment to this
Form 10-K.    o

Indicate by check mark whether the registrant is
an accelerated filer as defined by section 12-b  2 of
the
Act.    Yes o         No þ

The aggregate market value of Common Stock, par
value $.01 per share, held by non-affiliates of the registrant
as of March 27, 2003, was $12,260,650 based on the closing
price of $3.28 per share on the American Stock Exchange on such
date. For purposes of this computation, all directors, executive
officers and 10% shareholders are treated as affiliates of the
registrant.

Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan
confirmed by a
court.    Yes þ         No o

The registrant had 6,682,667 shares of Common
Stock, par value $.01, outstanding as of March 27, 2003.

DOCUMENTS INCORPORATED BY REFERENCE



|                                                                            |         
|--------------------------------------------------------------------------- | --------
|Portions of the proxy statement for the 2003 Annual Meeting of Shareholders | Part III



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TABLE OF CONTENTS



|                                                  |  |  |  |  |  |  |  | 
|------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                           
|PART II                                          
|PART III                                         
|PART IV                                          
|EX-10.44 LOAN AND SECURITY AGREEMENT             
|EX-10.45 MEZZANINE LOAN AGREEMENT                
|EX-10.55 FIRST AMENDMENT TO EMPLOYEE AGREEMENT   
|EX-21.1 SUBSIDIARIES OF LODGIAN, INC.            
|EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP         
|EX-23.2 NOTICE RE: CONSENT OF ARTHUR ANDERSEN LLP
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO     
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO     



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##### Table of Contents






PART I

Item 1.     Business

Overview

Lodgian, Inc. (Lodgian or the
Company) is one of the largest owners and operators
of full-service hotels in the United States. At March 24,
2003, Lodgian managed a portfolio of 97 hotels (18,265 rooms
located in 30 states and Canada). The portfolio included 92
hotels which were wholly-owned, four in which the Company had a
50% or greater equity interest and one in which the Company had
a minority equity interest. All of the hotels are owned in
separate operating subsidiaries or other legal entities.

Lodgians hotels are primarily full-service
properties which offer food and beverage services, meeting space
and banquet facilities and compete in the mid-price and upscale
segments of the lodging industry. Lodgian believes that these
segments have more consistent demand generators than other
segments of the lodging industry and have recently experienced
less development of new properties than other lodging segments,
such as limited service, economy and budget segments.

Of the Companys 97 hotel portfolio, 82 are
Crowne Plaza, Holiday Inn and Marriott brand hotels and eight
are affiliated with four other nationally recognized hospitality
franchises. The Companys strong brand affiliations bring
many benefits in terms of guest loyalty and market share
premiums.

History of the Company

Lodgian is a successor to Servico, Inc.
(Servico) as a result of Servicos merger (the
Merger) with Impac Hotel Group, LLC
(Impac), a privately-owned management and
development company. Servico was incorporated in 1956 under the
laws of the State of Delaware. The Merger was completed on
December 11, 1998 and was accounted for under the purchase
method of accounting.

At the time of the Merger, the Companys
portfolio included 142 owned hotels. At the end of 1999, the
Company adopted a strategic plan to reduce the size of its hotel
portfolio and, in 2000, adopted a strategic plan to reduce the
Companys debt. As a result of these strategies, at the end
of December 31, 2000, the Companys portfolio of owned
hotels stood at 112.

The Companys heavy debt load, the weaker
U.S. economy, the decline in travel in the aftermath of the
terrorist attacks on September 11, 2001 and impaired
availability of funds for maintaining the quality of the
Companys hotels combined to place adverse pressure on the
Companys cash flows and liquidity. As a result, on
December 20, 2001, the Company and substantially all of its
subsidiaries which owned hotel properties filed for voluntary
reorganization under Chapter 11 of the Bankruptcy Code. At
the time of the filing, the Companys portfolio included
106 hotel properties.

Less than one year later, at a Confirmation
Hearing held on November 5, 2002, the Bankruptcy Court
confirmed the Companys First Amended Joint Plan of
Reorganization (the Joint Plan of Reorganization)
and, on November 25, 2002, the Company and entities owning
78 hotels officially emerged from Chapter 11. Pursuant to
the terms of the Joint Plan of Reorganization, eight other
wholly-owned hotels were returned to the lenders in January 2003
in satisfaction of outstanding debt obligations and one hotel
was returned to the lessor of a capital lease.

Of the Companys 97 hotel portfolio, 18
hotels are owned by two subsidiaries (the Impac
Debtors) which were not part of the Joint Plan of
Reorganization and remain in Chapter 11 (the Impac
Hotels). The Impac Hotels represent approximately 19% of
the Companys total hotel properties and 14% of the
Companys total hotel rooms as of March 24, 2003. The
Impac Hotels contributed approximately 11.7% of the revenues
from the 105 properties comprising the Companys 2002
revenues. All of the Impac Hotels received financing prior to
the bankruptcy filing from one lender which has a claim of
$109.0 million against the Impac Debtors secured by the
Impac Hotels. The Company and the Impac Debtors have reached an
agreement with such lender which provides for a release of the
hotel collateral in exchange for the payment by the Impac
Debtors of an agreed amount (the Impac Settlement
Amount) by a date no later than May 31, 2003. If the
agreed

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amount is not paid by May 31, 2003, the
Impac Hotels will be returned to the lender in satisfaction of
outstanding mortgage obligations. On March 3, 2003, the
Impac Debtors filed a separate plan of reorganization (the
Impac Plan of Reorganization) pursuant to the terms
of which the Company and the Impac Debtors, through 18
newly-formed subsidiaries, would obtain financing from Lehman
Brothers Holdings Inc. (the Lehman Financing), which
would be used to pay the Impac Settlement Amount. Although there
can be no assurance, the Company is hopeful that the Impac Plan
of Reorganization will be approved and the Lehman Financing
successfully completed and, accordingly, that the Company will
be able to retain the Impac Hotels.


Franchise affiliations

With 85% of the Companys portfolio
comprised of Crowne Plaza, Holiday Inn and Marriott brand
hotels, the Company believes that it is well-positioned to take
advantage of superior brand equity and quality standards. The
Companys hotels also benefit from franchisors
central reservation offices, their global distribution systems
and brand internet booking sites. These together contribute
approximately 30% of the Companys total reservations for
these brands.

The Company is subject to certain property
maintenance and quality standard compliance requirements under
its franchise agreements. The Company periodically receives
notifications from its franchisors of events of noncompliance
with such agreements. In the past, management has cured most
cases of noncompliance within the applicable cure periods and
the events of noncompliance did not result in events of default
under the related loan agreements. However, in selected
situations, management may elect to not comply with the
franchisor requirements. In such situations, the Company will
either select an alternative franchisor or operate the property
independent of any franchisor.

At March 24, 2003, substantially all of the
Companys owned and managed hotels were affiliated with
national franchisors, as set forth in the following table:

|                                        |             |               |    |              |  |  |        |        | 
|--------------------------------------- | ----------- | ------------- | -- | ------------ |  |  | ------ | ------ | 
|                                        |             |              
|                                        |             | Total        
|                                        |             |              
|                                        |             | No. of Hotels |    | No. of Rooms
|                                        |             |               |    |             
|Six Continents (1)                      |             |               | 66 |              |  |  | 13,501 |       
|Marriott International(2)               |             |               | 16 |              |  |  | 1,892  |       
|Hilton(3)                               |             |               | 4  |              |  |  | 776    |       
|Choice Hotel(4)                         |             |               | 2  |              |  |  | 402    |       
|Starwood (5)                            |             |               | 1  |              |  |  | 189    |       
|Radisson                                |             |               | 1  |              |  |  | 163    |       
|Other (including non-franchised hotels) |             |               | 7  |              |  |  | 1,342  |       
|                                        |             |               |    |              |  |  |        |       
|                                        | Total Owned |               |    | 97           |  |  |        | 18,265 | 
|                                        |             |               |    |              |  |  |        |       



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|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(1) | Holiday Inn, Holiday Inn Express, Holiday Inn
    Select and Crowne Plaza brands.
|   
|(2) | Marriott, Courtyard by Marriott, Residence Inn
    and Fairfield Inn brands.     
|   
|(3) | Hilton and Doubletree brands.                                                    
|   
|(4) | Comfort Inn and Suites, Quality Inn and Clarion
    brands.                      
|   
|(5) | Four Points brands.                                                              

Franchisors provide a number of services to hotel
operators which can positively contribute to the improved
financial performance of their properties, including national
reservation systems, marketing and advertising programs and
direct sales programs. Hotels typically operate with high fixed
costs, and increases in revenues generated by affiliation with a
national franchisor can contribute positively to a hotels
financial performance.

The Companys license agreements with the
national hotel franchisors typically authorize the operation of
a hotel under the licensed name, at a specific location or
within a specified area, and require that the hotel be

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operated in accordance with standards specified
by the licensor. Generally, the license agreements require the
Company to pay a royalty fee, an advertising/marketing fee, a
fee for the use of the licensors nationwide reservation
system and certain ancillary charges. Royalty fees under various
license agreements generally range from 3% to 6.5% of gross room
revenues, while advertising/marketing fees provided for in
agreements generally range from 1% to 4.5% of gross room
revenues and reservation system fees generally range from 1% to
2% of gross room revenues. In the aggregate, royalty fees,
advertising/marketing fees and reservation fees range from 6% to
9% of gross revenues. The license agreements are subject to
cancellation in the event of a default, including the failure to
operate the hotel in accordance with the quality standards and
specifications of the licensor. As of March 24, 2003, the
Company was not in strict compliance with the terms of eighteen
of its franchise agreements and has received termination notices
from franchisors with respect to six of these eighteen
properties. While it is the Companys belief that it will
cure any defaults under the franchise agreements before the
applicable termination date, there can be no assurance that it
will be able to do so or be able to obtain additional time in
which to cure any defaults. In the event of a franchise
termination, management would seek to license the hotel with
another nationally-recognized brand.


The license agreements generally have terms of
between 10 and 20 years. The licensor may require the
Company to upgrade facilities at any time to comply with the
licensors then current standards. The licensee may apply
for a license renewal as existing licenses expire. In connection
with license renewals, the licensor may require payment of a
renewal fee, increased royalty and other recurring fees and
substantial renovation of the facility, or the licensor may
elect not to renew the license. It is the Companys policy
to review individual property franchise affiliations at the time
of property acquisition and, thereafter, on a regular basis.
These reviews may result in changes in such affiliations.

Joint Ventures

In addition to operating the 92 hotels which the
Company wholly owned at March 24, 2003, Lodgian operated
four hotels owned in joint venture in which the Company has a
50% or greater equity interest and one hotel in which the
Company has a minority equity interest. In each joint venture,
to varying extents, the Company shares decision making authority
with its joint venture partners and may not have sole discretion
with respect to a hotels disposition.

Competition and Seasonality

The hotel business is highly competitive. The
Company competes with other facilities on various bases,
including room prices, quality, service, location and amenities
customarily offered to the traveling public. The demand for
accommodations and the resulting cash flow vary seasonally. The
off-season tends to be the winter months for properties located
in colder weather climates and the summer months for properties
located in warmer weather climates. Levels of demand are
dependent upon many factors including general and local economic
conditions and changes in levels of tourism and business-related
travel. The hotels depend upon both commercial and tourist
travelers for revenues. Additionally, the hotels operate in
areas that contain numerous other competitive lodging facilities.

The advent and increasing prevalence of
travel-related internet web sites have increased price awareness
among travelers and price competition among similarly located
comparable hotels.

Lodgian also competes with other hotel owners and
operators with respect to: (1) licensing upscale and
mid-priced franchises in targeted markets; (2) acquiring
hotel properties to renovate and reposition; and
(3) acquiring developmental sites for new hotel properties.
The Companys competition is highly fragmented and is
comprised of relatively small, private owners and operators of
hotel properties, public companies and private equity funds.

Employees

At December 31, 2002, the Company had
approximately 4,860 full-time and 1,969 part-time associates.
The Company had 118 full-time associates engaged in
administrative and executive activities. The balance of
associates manage, operate and maintain the Companys
properties. At December 31, 2002, approximately

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754 of the Companys full and part-time
associates located at eight hotels were covered by collective
bargaining agreements which expire between April 2003 and
December 2005. The Company considers relations with its
associates to be good.


Insurance

Lodgian maintains insurance covering liabilities
for personal injuries and property damage. The Company also
maintains, among other types of insurance coverage: terrorism
insurance, directors and officers liability
insurance, liquor liability insurance, workers
compensation insurance, travel accident insurance for certain
employees, fiduciary liability insurance, business automobile
insurance, and environmental insurance on certain properties.
Management believes it maintains sufficient insurance coverage
for the operation of its business.

There are other types of losses, such as from
wars, for which the Company cannot obtain insurance at all or at
a reasonable cost. In the event of an uninsured loss or a loss
in excess of the Companys insurance limits, the Company
could lose both the revenues generated from the affected
property and the capital it has invested in the affected
property. Depending on the specific circumstances of the
affected property, it is possible that the Company could be
liable for any mortgage indebtedness or other obligations
related to the property. Any such loss could materially and
adversely affect the Companys financial condition and
results of operations.

Regulation

The Companys hotels are subject to certain
federal, state and local regulations which require the Company
to obtain and maintain various licenses and permits. All such
licenses and permits must be periodically renewed and may be
revoked or suspended for cause at any time. Certain of these
licenses and permits are material to the Companys business
and the loss of such licenses could have a material adverse
effect on the Companys financial condition and results of
operations. The Company is not aware of any reason why it should
not be in a position to maintain its licenses.

Lodgian is subject to certain federal and state
labor laws and regulations such as minimum wage requirements,
regulations relating to working conditions, laws restricting the
employment of illegal aliens and the Americans with Disabilities
Act. As a provider of restaurant services, the Company is also
subject to certain federal, state and local health laws and
regulations. The Company believes it complies with such laws and
regulations in all material respects. Lodgian is also subject in
certain states to dramshop statutes, which may give an injured
person the right to recover damages from any establishment which
wrongfully served alcoholic beverages to a person who, while
intoxicated, caused the injury. Management believes that the
Companys insurance coverage with respect to the service of
alcoholic beverages is adequate.

To date, federal and state environmental
regulations have not had a material effect on the Companys
operations. However, such laws potentially impose cleanup costs
for hazardous waste contamination on property owners. If any
material hazardous waste contamination problems do exist on any
of the Companys properties, the Company may be exposed to
liability for the costs associated with the cleanup of such
sites.

SEC Filings and financial
information

Our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934 are available free of charge on our website
(www.Lodgian.com) as soon as reasonably practicable after these
are electronically filed with, or furnished to, the Securities
and Exchange Commission (SEC).

The public may read and copy any materials the
Company files with the SEC at the SECs Public Reference
Room at 450 Fifth Street, NW, Washington, DC 20549. The public
may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site (http://www.sec.gov) that contains reports, proxy
and information statements, and other information regarding the
Company.

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Disclosure of financial information relating to
revenues from external customers, profit or loss for the last
three fiscal years and total assets for the last two years may
be found in the Consolidated Financial Statements, beginning on
page F-1.

Item 2.     Properties

Lodgian owned or managed 106 hotels, containing
19,888 rooms located in 32 states and Canada, at
December 31, 2002. These hotels included 101 wholly-owned
hotels, four hotels in which the Company had a 50% or greater
equity interest, and one hotel in which the Company had a
minority equity interest. In January 2003, pursuant to the Joint
Plan of Reorganization, eight of the wholly-owned hotels were
returned to the lenders and one hotel was returned to the lessor
of a capital lease thereby reducing the portfolio of
wholly-owned hotels to 92 and the total managed portfolio to 97.
The Companys Corporate office is located in Atlanta,
Georgia.

Dispositions

As discussed in Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of OperationsLiquidity and Capital
Resources, at the end of 1999, the Company adopted a
strategic plan to reduce the size of its hotel portfolio and in
2000, adopted a strategic plan to reduce Company debt. As a
result of these strategies, during 2000, the Company sold
nineteen hotel properties and four other assets. During 2001,
prior to the Companys Chapter 11 filing, six
additional hotels were sold. In January 2003, in connection with
the Companys emergence from Chapter 11, eight hotels
were returned to the secured lenders and one hotel was returned
to the lessor of a capital lease.

Portfolio

The Companys hotel portfolio, as of
March 24, 2003, by franchisor, is set forth below.

|                                         |  |        |  |        |  |          |     |               |  |                     |  |  |      | 
|---------------------------------------- |  | ------ |  | ------ |  | -------- | --- | ------------- |  | ------------------- |  |  | ---- | 
|                                         |  |        |  |        |  |          |     | Year of Last 
|                                         |  | No. of |  | No. of |  |          |     | Renovation or
|Franchisor/Hotel Name                    |  | Hotels |  | Rooms  |  | Location |     | Construction 
|                                         |  |        |  |        |  |          |     |              
|Six Continents                           |  |        |  |        |  |          |     |               |  |                     |  |  |      | 
|Crowne Plaza Albany                      |  |        |  |        |  |          | 384 |               |  | Albany, NY          |  |  | 2001 | 
|Crowne Plaza Cedar Rapids                |  |        |  |        |  |          | 275 |               |  | Cedar Rapids, IA    |  |  | 1998 | 
|Crowne Plaza Houston                     |  |        |  |        |  |          | 291 |               |  | Houston, TX         |  |  | 1999 | 
|Crowne Plaza Macon (60% owned)           |  |        |  |        |  |          | 297 |               |  | Macon, GA           |  |  | 1998 | 
|Crowne Plaza Pittsburgh                  |  |        |  |        |  |          | 193 |               |  | Pittsburgh, PA      |  |  | 2001 | 
|Crowne Plaza West Palm Beach (50% owned) |  |        |  |        |  |          | 219 |               |  | West Palm Beach, FL |  |  | 2001 | 
|Crowne Plaza Worcester                   |  |        |  |        |  |          | 243 |               |  | Worcester, MA       |  |  | 1996 | 
|Holiday Inn Arden Hills                  |  |        |  |        |  |          | 156 |               |  | St. Paul, MN        |  |  | 1995 | 
|Holiday Inn Austin (South)               |  |        |  |        |  |          | 210 |               |  | Austin, TX          |  |  | 1994 | 
|Holiday Inn Belmont                      |  |        |  |        |  |          | 135 |               |  | Belmont, MD         |  |  | 2000 | 
|Holiday Inn Brunswick                    |  |        |  |        |  |          | 126 |               |  | Brunswick, GA       |  |  | 1998 | 
|Holiday Inn BWI Airport                  |  |        |  |        |  |          | 260 |               |  | Baltimore, MD       |  |  | 2000 | 
|Holiday Inn Cincinnati(1)                |  |        |  |        |  |          | 243 |               |  | Cincinnati, OH      |  |  | 1998 | 
|Holiday Inn City Center (30% owned)      |  |        |  |        |  |          | 240 |               |  | Columbus, OH        |  |  | 2002 | 
|Holiday Inn Clarksburg(1)                |  |        |  |        |  |          | 160 |               |  | Clarksburg, WV      |  |  | 1997 | 
|Holiday Inn Cromwell Bridge              |  |        |  |        |  |          | 139 |               |  | Cromwell Bridge, MD |  |  | 2000 | 
|Holiday Inn Dothan                       |  |        |  |        |  |          | 102 |               |  | Dothan, AL          |  |  | 1996 | 
|Holiday Inn East Hartford                |  |        |  |        |  |          | 130 |               |  | East Hartford, CT   |  |  | 2000 | 

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|                                    |  |        |  |        |  |          |     |               |  |                     |  |  |                 | 
|----------------------------------- |  | ------ |  | ------ |  | -------- | --- | ------------- |  | ------------------- |  |  | --------------- | 
|                                    |  |        |  |        |  |          |     | Year of Last 
|                                    |  | No. of |  | No. of |  |          |     | Renovation or
|Franchisor/Hotel Name               |  | Hotels |  | Rooms  |  | Location |     | Construction 
|                                    |  |        |  |        |  |          |     |              
|Holiday Inn Express Gadsden         |  |        |  |        |  |          | 141 |               |  | Gadsden, AL         |  |  | Being renovated | 
|Holiday Inn Express Palm Desert     |  |        |  |        |  |          | 129 |               |  | Palm Desert, CA     |  |  | 1995            | 
|Holiday Inn Express Pensacola       |  |        |  |        |  |          | 214 |               |  | Pensacola, FL       |  |  | 1996            | 
|Holiday Inn Fairmont(1)             |  |        |  |        |  |          | 106 |               |  | Fairmont, WV        |  |  | 1997            | 
|Holiday Inn Florence(1)             |  |        |  |        |  |          | 105 |               |  | Florence, KY        |  |  | 1997            | 
|Holiday Inn Fort Mitchell(1)        |  |        |  |        |  |          | 214 |               |  | Fort Mitchell, KY   |  |  | Being renovated | 
|Holiday Inn Fort Wayne              |  |        |  |        |  |          | 208 |               |  | Fort Wayne, IN      |  |  | 1995            | 
|Holiday Inn Frederick               |  |        |  |        |  |          | 158 |               |  | Frederick, MD       |  |  | 2000            | 
|Holiday Inn Frisco                  |  |        |  |        |  |          | 217 |               |  | Frisco, CO          |  |  | Being renovated | 
|Holiday Inn Glen Burnie North       |  |        |  |        |  |          | 127 |               |  | Glen Burnie, MD     |  |  | 2000            | 
|Holiday Inn Grand Island            |  |        |  |        |  |          | 261 |               |  | Grand Island, NY    |  |  | 2000            | 
|Holiday Inn Greentree               |  |        |  |        |  |          | 200 |               |  | Pittsburgh, PA      |  |  | 2000            | 
|Holiday Inn Hamburg(1)              |  |        |  |        |  |          | 130 |               |  | Buffalo, NY         |  |  | 1998            | 
|Holiday Inn Hilton Head             |  |        |  |        |  |          | 201 |               |  | Hilton Head, SC     |  |  | 2001            | 
|Holiday Inn Inner Harbor            |  |        |  |        |  |          | 375 |               |  | Baltimore, MD       |  |  | 2000            | 
|Holiday Inn Jamestown               |  |        |  |        |  |          | 146 |               |  | Jamestown, NY       |  |  | 1998            | 
|Holiday Inn Jekyll Island           |  |        |  |        |  |          | 198 |               |  | Jekyll Island, GA   |  |  | 2000            | 
|Holiday Inn Lancaster (East)        |  |        |  |        |  |          | 189 |               |  | Lancaster, PA       |  |  | 2000            | 
|Holiday Inn Lansing West            |  |        |  |        |  |          | 244 |               |  | Lansing, MI         |  |  | 1998            | 
|Holiday Inn Lawrence                |  |        |  |        |  |          | 192 |               |  | Lawrence, KS        |  |  | 2002            | 
|Holiday Inn Manhattan               |  |        |  |        |  |          | 197 |               |  | Manhattan, KS       |  |  | 2002            | 
|Holiday Inn Marietta                |  |        |  |        |  |          | 193 |               |  | Marietta, GA        |  |  | Being renovated | 
|Holiday Inn Market Center Dallas    |  |        |  |        |  |          | 246 |               |  | Dallas, TX          |  |  | 1998            | 
|Holiday Inn McKnight Rd             |  |        |  |        |  |          | 147 |               |  | Pittsburgh, PA      |  |  | 1995            | 
|Holiday Inn Meadow Lands            |  |        |  |        |  |          | 138 |               |  | Pittsburgh, PA      |  |  | 1996            | 
|Holiday Inn Melbourne (50% owned)   |  |        |  |        |  |          | 295 |               |  | Melbourne, FL       |  |  | 2002            | 
|Holiday Inn Memphis(1)              |  |        |  |        |  |          | 173 |               |  | Memphis, TN         |  |  | 1998            | 
|Holiday Inn Monroeville             |  |        |  |        |  |          | 188 |               |  | Monroeville, PA     |  |  | 1998            | 
|Holiday Inn Morgantown(1)           |  |        |  |        |  |          | 147 |               |  | Morgantown, WV      |  |  | 1997            | 
|Holiday Inn Myrtle Beach            |  |        |  |        |  |          | 133 |               |  | Myrtle Beach, SC    |  |  | 1998            | 
|Holiday Inn North Miami(1)          |  |        |  |        |  |          | 98  |               |  | Miami, FL           |  |  | 1998            | 
|Holiday Inn Parkway East            |  |        |  |        |  |          | 178 |               |  | Pittsburgh, PA      |  |  | 2001            | 
|Holiday Inn Phoenix West            |  |        |  |        |  |          | 144 |               |  | Phoenix, AZ         |  |  | Being renovated | 
|Holiday Inn Rolling Meadows         |  |        |  |        |  |          | 420 |               |  | Rolling Meadows, IL |  |  | 2000            | 
|Holiday Inn Santa Fe                |  |        |  |        |  |          | 130 |               |  | Santa Fe, NM        |  |  | Being renovated | 
|Holiday Inn Select DFW              |  |        |  |        |  |          | 282 |               |  | Dallas, TX          |  |  | 1997            | 
|Holiday Inn Select Niagara Falls    |  |        |  |        |  |          | 397 |               |  | Niagara Falls, NY   |  |  | 1999            | 
|Holiday Inn Select Phoenix Airport  |  |        |  |        |  |          | 298 |               |  | Phoenix, AZ         |  |  | 1995            | 
|Holiday Inn Select Strongsville     |  |        |  |        |  |          | 302 |               |  | Cleveland, OH       |  |  | 1996            | 
|Holiday Inn Select Windsor, Ontario |  |        |  |        |  |          | 214 |               |  | Windsor, Ontario    |  |  | 1998            | 
|Holiday Inn Sheffield               |  |        |  |        |  |          | 201 |               |  | Sheffield, AL       |  |  | Being renovated | 
|Holiday Inn Silver Spring           |  |        |  |        |  |          | 231 |               |  | Silver Spring, MD   |  |  | 1998            | 
|Holiday Inn St. Louis North         |  |        |  |        |  |          | 392 |               |  | St. Louis, MO       |  |  | 1996            | 

6



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##### Table of Contents



|                                                     |          |        |    |        |  |          |        |               |  |                   |  |  |                 |  | 
|---------------------------------------------------- | -------- | ------ | -- | ------ |  | -------- | ------ | ------------- |  | ----------------- |  |  | --------------- |  | 
|                                                     |          |        |    |        |  |          |        | Year of Last 
|                                                     |          | No. of |    | No. of |  |          |        | Renovation or
|Franchisor/Hotel Name                                |          | Hotels |    | Rooms  |  | Location |        | Construction 
|                                                     |          |        |    |        |  |          |        |              
|Holiday Inn Syracuse(1)                              |          |        |    |        |  |          | 152    |               |  | Syracuse, NY      |  |  | 1997            | 
|Holiday Inn University Mall                          |          |        |    |        |  |          | 152    |               |  | Pensacola, FL     |  |  | 1997            | 
|Holiday Inn Valdosta                                 |          |        |    |        |  |          | 167    |               |  | Valdosta, GA      |  |  | Being renovated | 
|Holiday Inn Winter Haven                             |          |        |    |        |  |          | 228    |               |  | Winter Haven, FL  |  |  | 1998            | 
|Holiday Inn York (Arsenal Rd.)                       |          |        |    |        |  |          | 100    |               |  | York, PA          |  |  | 2000            | 
|                                                     |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|SUBTOTAL                                             |          |        | 66 |        |  |          | 13,501 |               |  |                   |  |  |                 | 
|MARRIOTT INTERNATIONAL                               |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|Courtyard by Marriott Abilene                        |          |        |    |        |  |          | 99     |               |  | Abilene, TX       |  |  | 1996            | 
|Courtyard by Marriott Bentonville                    |          |        |    |        |  |          | 90     |               |  | Bentonville, AR   |  |  | 1996            | 
|Courtyard by Marriott Buckhead                       |          |        |    |        |  |          | 181    |               |  | Atlanta, GA       |  |  | 1996            | 
|Courtyard by Marriott Florence                       |          |        |    |        |  |          | 78     |               |  | Florence, KY      |  |  | Being renovated | 
|Courtyard by Marriott Lafayette(1)                   |          |        |    |        |  |          | 90     |               |  | Lafayette, LA     |  |  | 1997            | 
|Courtyard by Marriott Paducah                        |          |        |    |        |  |          | 100    |               |  | Paducah, KY       |  |  | 1997            | 
|Courtyard by Marriott Revere                         |          |        |    |        |  |          | 154    |               |  | Revere, MA        |  |  | 1999            | 
|Courtyard by Marriott Tulsa(1)                       |          |        |    |        |  |          | 122    |               |  | Tulsa, OK         |  |  | 1997            | 
|Fairfield Inn Augusta(1)                             |          |        |    |        |  |          | 117    |               |  | Augusta, GA       |  |  | 2002            | 
|Fairfield Inn Colchester(1)                          |          |        |    |        |  |          | 117    |               |  | Colchester, VT    |  |  | 2002            | 
|Fairfield Inn Jackson(1)                             |          |        |    |        |  |          | 105    |               |  | Jackson, TN       |  |  | 2002            | 
|Fairfield Inn Merrimack(1)                           |          |        |    |        |  |          | 116    |               |  | Merrimack, NH     |  |  | 1998            | 
|Fairfield Inn Valdosta                               |          |        |    |        |  |          | 108    |               |  | Valdosta, GA      |  |  | 1997            | 
|Marriott Denver(1)                                   |          |        |    |        |  |          | 238    |               |  | Denver, CO        |  |  | 1998            | 
|Residence Inn Dedham                                 |          |        |    |        |  |          | 81     |               |  | Dedham, MA        |  |  | 1998            | 
|Residence Inn Little Rock                            |          |        |    |        |  |          | 96     |               |  | Little Rock, AR   |  |  | 1998            | 
|                                                     |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|                                                     | SUBTOTAL |        |    | 16     |  |          |        | 1,892         |  |                   |  |  |                 |  | 
|HILTON                                               |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|Doubletree Club Philadelphia                         |          |        |    |        |  |          | 189    |               |  | Philadelphia, PA  |  |  | Being renovated | 
|Hilton Fort Wayne                                    |          |        |    |        |  |          | 244    |               |  | Fort Wayne, IN    |  |  | Being renovated | 
|Hilton Inn Columbia                                  |          |        |    |        |  |          | 152    |               |  | Columbia, MD      |  |  | Being renovated | 
|Hilton Inn Northfield                                |          |        |    |        |  |          | 191    |               |  | Troy, MI          |  |  | Being renovated | 
|                                                     |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|                                                     | SUBTOTAL |        |    | 4      |  |          |        | 776           |  |                   |  |  |                 |  | 
|CHOICE HOTEL                                         |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|Clarion Northwoods Atrium Inn                        |          |        |    |        |  |          | 197    |               |  | Charleston, SC    |  |  | 1994            | 
|Clarion Quality Hotel & Conference Ctr.
    Metairie |          |        |    |        |  |          | 205    |               |  | New Orleans, LA   |  |  | 1995            | 
|                                                     |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|                                                     | SUBTOTAL |        |    | 2      |  |          |        | 402           |  |                   |  |  |                 |  | 
|STARWOOD                                             |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|Four Points Niagara Inn                              |          |        |    |        |  |          | 189    |               |  | Niagara Falls, NY |  |  | 1999            | 
|                                                     |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|                                                     | SUBTOTAL |        |    | 1      |  |          |        | 189           |  |                   |  |  |                 |  | 
|RADISSON                                             |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|Radisson Phoenix Hotel                               |          |        |    |        |  |          | 163    |               |  | Phoenix, AZ       |  |  | 1995            | 
|                                                     |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 
|                                                     | SUBTOTAL |        |    | 1      |  |          |        | 163           |  |                   |  |  |                 |  | 
|OTHER                                                |          |        |    |        |  |          |        |               |  |                   |  |  |                 | 

7



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##### Table of Contents



|                                                                      |          |        |   |        |  |          |           |               |  |                 |  |  |                 |  | 
|--------------------------------------------------------------------- | -------- | ------ | - | ------ |  | -------- | --------- | ------------- |  | --------------- |  |  | --------------- |  | 
|                                                                      |          |        |   |        |  |          |           | Year of Last 
|                                                                      |          | No. of |   | No. of |  |          |           | Renovation or
|Franchisor/Hotel Name                                                 |          | Hotels |   | Rooms  |  | Location |           | Construction 
|                                                                      |          |        |   |        |  |          |           |              
|Dothan Plaza Hotel                                                    |          |        |   |        |  |          | 113       |               |  | Dothan, AL      |  |  | 2002            | 
|French Quarter Suites Memphis                                         |          |        |   |        |  |          | 105       |               |  | Memphis, TN     |  |  | 1997            | 
|Hurstborne Hotel, a Louisville Conference Center                      |          |        |   |        |  |          | 393       |               |  | Louisville, KY  |  |  | 2000            | 
|Mayfair House Coconut Grove(1)                                        |          |        |   |        |  |          | 179       |               |  | Miami, FL       |  |  | Being renovated | 
|New Orleans Airport Plaza Hotel And Conference
    Center (82% owned) |          |        |   |        |  |          | 244       |               |  | New Orleans, LA |  |  | Being renovated | 
|Pensacola Plantation Oak Inn                                          |          |        |   |        |  |          | 122       |               |  | Pensacola, FL   |  |  | 2002            | 
|University Inn, Bloomington                                           |          |        | 7 |        |  |          | 186 1,342 |               |  | Bloomington, IN |  |  | 1992            | 
|                                                                      | SUBTOTAL |        |   | 97     |  |          |           | 18,265        |  |                 |  |  |                 |  | 
|TOTAL                                                                 |          |        |   |        |  |          |           |               |  |                 |  |  |                 | 
|                                                                      |          |        |   |        |  |          |           |               |  |                 |  |  |                 | 



---



|    |                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These hotels are owned by the Impac Debtors and
    could potentially be returned to the lenders, in satisfaction of
    outstanding mortgage obligations, in the event that the Lehman
    financing is not completed.

Fourteen of the hotels listed above are located
on land subject to long-term leases. Generally, the leases are
for terms in excess of the depreciable lives of the improvements
or contain a purchase option and provide for fixed rents. In
certain instances, additional rents, based on a percentage of
revenue or cash flow, may be payable. The leases generally
require the Company to pay the cost of repairs, insurance and
real estate taxes.

Item 3.     Legal
Proceedings

On December 20, 2001, the Company and
substantially all of its subsidiaries which owned hotel
properties filed for voluntary reorganization under
Chapter 11 of the Bankruptcy Code.

Less than one year later, at a Confirmation
Hearing held on November 5, 2002, the Bankruptcy Court
confirmed the Companys First Amended Joint Plan of
Reorganization (the Joint Plan of Reorganization)
and, on November 25, 2002, the Company and entities owning
78 hotels officially emerged from Chapter 11. Pursuant to
the terms of the Joint Plan of Reorganization, eight other
wholly-owned hotels were returned to lenders in January 2003 in
satisfaction of outstanding debt obligations and one hotel was
returned to the lessor of a capital lease.

Of the Companys 97 hotel portfolio, 18
hotels are owned by two subsidiaries (the Impac
Debtors) which were not part of the Joint Plan of
Reorganization and remain in Chapter 11 (the Impac
Hotels). The Impac Hotels represent approximately 19% of
the Companys total hotel properties, and 14% of the
Companys total hotel rooms as of March 24, 2003. The
Impac Hotels contributed approximately 11.7% of the revenues
from the 105 properties comprising the Companys 2002
revenues. All of the Impac Hotels received financing prior to
the bankruptcy filing from one lender which has a claim of
$109.0 million against the Impac Debtors secured by the
Impac Hotels. The Company and the Impac Debtors have reached an
agreement with such lender which provides for a release of the
hotel collateral in exchange for the payment by the Impac
Debtors of an agreed amount (the Impac Settlement
Amount) by a date no later than May 31, 2003. If the
agreed amount is not paid by May 31, 2003, the Impac Hotels
will be returned to the lender in satisfaction of outstanding
mortgage obligations. On March 3, 2003, the Impac Debtors
filed a separate plan of reorganization (the Impac Plan of
Reorganization) pursuant to the terms of which the Company
and the Impac Debtors, through 18 newly-formed subsidiaries,
would obtain financing from Lehman Brothers Holdings Inc. (the
Lehman Financing), which would be used to pay the
Impac Settlement Amount. Although there can be no assurance, the
Company is hopeful that the Impac Plan of Reorganization will be
approved and the Lehman Financing successfully completed and,
accordingly, that the Company will be able to retain the Impac
Hotels.

8



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##### Table of Contents



Pursuant to the Joint Plan, the following
significant events took effect upon the Companys emergence
from reorganization proceedings:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | preferred shares totaling 5,000,000 (par value
    $0.01; initial liquidation value $25 per share) became available
    for issuance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | new common shares totaling 7,000,000 (par value
    $0.01) became available for issuance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Class A warrants to purchase 1,510,638
    shares of common stock at $18.29 per share, became available for
    issuance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Class B warrants to purchase 1,029,366
    shares of common stock at $25.44 per share, became available for
    issuance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | the previous equity shares (28,479,837 in total)
    were cancelled and the previous stockholders received their pro
    rata share of 207,900 shares of common stock along with warrants
    to purchase 251,823 shares of common stock at $18.29 per share
    (Class A warrants) and warrants to purchase 778,304 shares of
    common stock at an exercise price of $25.44 per share
    (Class B warrants);                                                                                                                                                                                                                                                                                                       
|
| |  | the 12.25% Convertible Redeemable Equity
    Structured Trust Securities (CRESTS) were cancelled
    and the holders of the CRESTS received their pro rata share of
    868,000 shares of the common stock along with warrants to
    purchase 1,258,815 shares of common stock at $18.29 per share
    (Class A warrants) and warrants to purchase 251,062 shares
    of common stock at an exercise price of $25.44 per share
    (Class B warrants);                                                                                                                                                                                                                                                              
|
| |  | the Senior Subordinated Notes (the
    Notes) were cancelled and the holders of the Notes
    received their pro rata share of 4,690,600 shares of preferred
    stock and 5,557,511 shares of common stock;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | the holders of allowed general unsecured claims
    became entitled to 309,400 shares of preferred stock and 366,589
    shares of common stock. Until distributed, these shares form
    part of the Disputed Claims Reserve for the pre-bankruptcy
    petition general unsecured creditors. These shares will be
    periodically distributed as the disputed claims are resolved;                                                                                                                                                                                                                                                                                                                                  
|
| |  | the Company closed on its $309.0 million
    exit financing arrangements with and through Merrill Lynch
    Mortgage Lending, Inc. (used to repay previous debt obligations,
    to fund payments of certain allowed claims and to fund portions
    of certain required cash escrows); this financing is secured by
    57 of the Companys hotels.                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Loans from lenders approximating
    $86.0 million, secured by 21 of the Companys hotels,
    were reinstated on their previous terms, except for the
    extension of certain maturities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | in accordance with AICPA, Statement of Position
    (SOP) 90-7, Financial Reporting by Entities in
    Reorganization Under the Bankruptcy Code, the Company
    implemented fresh start reporting effective November 22,
    2002 (the date on which the exit financing agreement was
    signed). As a result, assets and liabilities have been recorded
    based on fair values. The Consolidated Financial Statements
    subsequent to the Companys emergence from Chapter 11
    are those of a new reporting entity (the Successor)
    and are not comparable with the financial statements of the
    Company prior to the effective date of the Joint Plan of
    Reorganization (the Predecessor).

The Company was a party in litigation with
Hospitality Restoration and Builders, Inc. (HRB), a
general contractor hired to perform work on six of the
Companys hotels. The litigation involved hotels in Texas,
Illinois, and New York. In general, HRB claimed that the Company
breached contracts to renovate the hotels by not paying for work
performed. The Company contended that it was over-billed by HRB
and that a significant portion of the completed work was
defective. In July 2001, the parties agreed to settle the
litigation pending in Texas and Illinois. In exchange for mutual
dismissals and full releases, the Company paid HRB $750,000.
With respect to the matter pending in the state of New York, HRB
claimed that it was owed $10.7 million. The Company
asserted a counterclaim of $7 million. In February 2003,
the Company and HRB agreed to settle the litigation pending in
the state of New York. In exchange for mutual dismissals and
full releases, the Company agreed to pay HRB $625,000. The
Company has fully provided for this liability in its
Consolidated Financial Statements.

9



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##### Table of Contents



The Company is a party to other legal proceedings
arising in the ordinary course of business, the impact of which
would not, either individually or in the aggregate, in
managements opinion, have a material adverse effect on its
financial position or results of operations.

There are other pre-bankruptcy petition
litigations and claims pending against the Company, but the
Companys exposure to such litigations and claims is
limited to the Disputed Claims Reserve.

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

No matters were submitted to a vote of security
holders during 2002.




PART II



|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

On November 25, 2002, the Companys
Plan of Reorganization became effective, resulting in the
cancellation of 28,479,837 common shares. New common shares
totaling 7,000,000 became available for issuance. Of this
amount, 6,682,667 shares have been issued. The remaining 317,333
shares form part of the Disputed Claims Reserve available for
issuance to the general unsecured creditors. Similarly,
5,000,000 shares of preferred stock became available for
issuance. Of this amount, 4,732,160 have been issued. The
remaining 267,840 form part of the Disputed Claims Reserve.

No assurances can be given with respect to the
prices at which the Companys securities will trade and
such prices may be materially different from those derived in
connection with the Joint Plan of Reorganization.

Prior to November 21, 2001, the
Companys common stock was traded on the New York Stock
Exchange under the symbol LOD. Subsequent to
November 21, 2001, the Companys stock traded on the
Over-the-Counter Bulletin Board under the trading symbol
LODN.OB. On emergence from Chapter 11, the
common stock traded on the Over-the-Counter Bulletin Board under
the symbol LDGIV.OB until January 28, 2003 when
it began trading on the American Stock Exchange under the symbol
LGN. The following table sets forth the high and low
sales prices of the Companys common stock on a quarterly
basis for the past two years.

Before Reorganization

|               |  |      |      |     |  |   |      | 
|-------------- |  | ---- | ---- | --- |  | - | ---- | 
|               |  | High |      | Low
|               |  |      |      |    
|2001           |  |      |      |     |  |   |      | 
|First Quarter  |  | $    | 4.00 |     |  | $ | 1.10 | 
|Second Quarter |  |      | 1.20 |     |  |   | 0.62 | 
|Third Quarter  |  |      | 0.75 |     |  |   | 0.07 | 
|Fourth Quarter |  |      | 0.35 |     |  |   | 0.03 | 
|2002           |  |      |      |     |  |   |      | 
|First Quarter  |  | $    | 0.10 |     |  | $ | 0.06 | 
|Second Quarter |  |      | 0.17 |     |  |   | 0.05 | 
|Third Quarter  |  |      | 0.07 |     |  |   | 0.04 | 
|Fourth Quarter |  |      | 0.07 |     |  |   | 0.03 | 

After Reorganization

|                                                  |  |      |    |     |  |  |    |  
|------------------------------------------------- |  | ---- | -- | --- |  |  | -- | -
|                                                  |  | High |    | Low
|                                                  |  |      |    |    
|2002                                              |  |      |    |     |  |  |    |  
|Period November 26, 2002 to
    December 31, 2002 |  |      | (1 | )   |  |  | (1 | )



---



|    |                                                
|--- | -----------------------------------------------
|(1) | No reliable data was available for this period.

10



---



##### Table of Contents



As of March 24, 2003, there were 302
shareholders of record who had exchanged old Lodgian common
stock for the new stock. In addition, there were 527 and 2,062
old Lodgian shareholders and Servico shareholders, respectively,
who had not yet converted their shares into new Lodgian common
stock.

As of March 24, 2003, the shares to be
issued to the general unsecured creditors totaled 366,589 shares
of common stock and 309,400 shares of preferred stock. On
March 27, 2003, the Company made its first distribution of
49,256 common and 41,560 preferred shares to the general
unsecured creditors. The remaining shares (317,333 common and
267,840 preferred) represent part of the Disputed Claims
Reserve. These shares are considered issued and outstanding for
accounting purposes.

The Board of Directors of the Company will
determine future dividend policies based on the Companys
financial condition, profitability, cash flow, capital
requirements and business outlook, among other factors.

Because all of the Companys cash flows will
be used in the foreseeable future to fund operations, capital
improvements and to make payments under the exit financing
agreement and other mortgage financings, the Company does not
anticipate paying dividends on the new common stock in the near
future.

The new preferred stock issued on the
Companys emergence from Chapter 11 accrues cumulative
dividends, compounded annually at the rate of 12.25%. On the
first anniversary of the Companys emergence from
Chapter 11 (November 25, 2003), the preferred dividend
will be paid via the issuance of additional shares of preferred
stock. On the second and third anniversary (November 25,
2004 and 2005), the Board of Directors will declare such
dividends and will have the option of paying such dividends in
cash or in kind via the issuance of additional shares of
preferred stock.

Equity Compensation Plan Information

|                                                               |  |                      |    |                   |  |                      |     |   |  |  |            |  
|-------------------------------------------------------------- |  | -------------------- | -- | ----------------- |  | -------------------- | --- | - |  |  | ---------- | -
|                                                               |  |                      |    |                   |  | Number of           
|                                                               |  |                      |    |                   |  | Securities Remaining
|                                                               |  | Number of            |    | Weighted-Average  |  | Available for Future
|                                                               |  | Securities to be     |    | Exercise Price of |  | Issuance under      
|                                                               |  | Issued upon Exercise |    | Outstanding       |  | Equity Compensation 
|                                                               |  | of Outstanding       |    | Options,          |  | Plans (Excluding    
|                                                               |  | Options, Warrants    |    | Warrants and      |  | Securities Reflected
|                                                               |  | and Rights           |    | Rights            |  | in Column(a)        
|                                                               |  |                      |    |                   |  |                     
|Plan category                                                  |  |                      | (a | )                 |  |                      | (b  | ) |  |  | (c         | )
|Equity compensation plans approved by security
    holders     |  |                      | 0  |                   |  |                      | n/a |   |  |  | 0          |  
|Equity compensation plans not approved by
    security holders |  |                      | 0  |                   |  |                      | n/a |   |  |  | 1,060,000* |  



---



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | On November 25, 2002, the Company adopted a
    new Stock Incentive Plan (the Stock Incentive Plan)
    which replaced the Option Plan previously in place. The Stock
    Incentive Plan was not approved by security holders as it was
    adopted in connection with the Companys Joint Plan of
    Reorganization. In accordance with the Stock Incentive Plan,
    awards to acquire up to 1,060,000 shares of common stock could
    be granted to officers or other key employees or consultants of
    the Company as determined by a committee appointed by the Board
    of Directors. Awards may consist of stock options, stock
    appreciation rights, stock awards, performance share awards,
    section 162(m) awards or other awards determined by the
    committee. Stock options granted pursuant to the Stock Incentive
    Plan cannot be granted at an exercise price which is less than
    100% of the fair market value per share on the date of the
    grant. Vesting, exercisability, payment and other restrictions
    pertaining to any awards made pursuant to the Stock Incentive
    Plan are determined by the committee. As of December 31,
    2002, no awards had been made pursuant to the Stock Incentive
    Plan.

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Item 6.     Selected
Financial Data

Selected Consolidated Financial Data

The following table presents selected financial
data derived from the Companys historical financial
statements for the periods, November 23, 2002 to
December 31, 2002 (the Successor) and
January 1, 2002 to November 22, 2002 and the four
years ended December 31, 2001 (the
Predecessor). This financial data should be read in
conjunction with Item 7. Managements Discussion
and Analysis of Financial Condition and Results of
Operations and Item 8. Financial Statements and
Supplementary Data included in this Form 10-K.

The Company emerged from Chapter 11 on
November 25, 2002 and implemented fresh start reporting
effective November 22, 2002 (the date that the exit
financing agreement was signed). As a result, the Consolidated
Statements of Operations information for the period
November 23 to December 31, 2002 reflect the
Companys financial position and operating results after
the effect of the Companys Plan of Reorganization and the
application of the principles of fresh start reporting in
accordance with SOP 90-7. The Consolidated Financial
Statements are those of a new reporting entity and are not
comparable with the financial statements of the Predecessor
Company.

|                                                             |  |                                   |           |               |  |      |            |      |  |      |            |      |  |   |            |   |  |   |            |   |  |   |            |  
|------------------------------------------------------------ |  | --------------------------------- | --------- | ------------- |  | ---- | ---------- | ---- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                             |  |                                   |           |              
|                                                             |  | Successor                         |           | Predecessor  
|                                                             |  |                                   |           |              
|                                                             |  | November 23,                      |           | January 1, to |  |     
|                                                             |  | to December 31,                   |           | November 22,  |  |     
|                                                             |  | 2002                              |           | 2002          |  | 2001 |            | 2000 |  | 1999 |            | 1998
|                                                             |  |                                   |           |               |  |      |            |      |  |      |            |     
|                                                             |  |                                  
|                                                             |  | (In thousands, except share data)
|Revenues                                                     |  | $                                 | 31,747    |               |  | $    | 378,024    |      |  | $    | 447,556    |      |  | $ | 580,897    |   |  | $ | 592,420    |   |  | $ | 395,214    |  
|Net (loss) income                                            |  |                                   | (9,326    | )             |  |      | 12,366     |      |  |      | (142,764   | )    |  |   | (87,955    | ) |  |   | (60,693    | ) |  |   | (5,221     | )
|Net (loss) income attributable to common stock               |  |                                   | (10,836   | )             |  |      | 12,366     |      |  |      | (142,764   | )    |  |   | (87,955    | ) |  |   | (60,693    | ) |  |   | (5,221     | )
|Earnings per common share, basic and diluted:                |  |                                   |           |               |  |      |            |      |  |      |            |      |  |   |            |   |  |   |            |   |  |   |            |  
|Net (loss) income attributable to common
    stock           |  |                                   | (1.55     | )             |  |      | 0.43       |      |  |      | (5.04      | )    |  |   | (3.12      | ) |  |   | (2.23      | ) |  |   | (0.26      | )
|Basic and diluted weighted average shares                    |  |                                   | 7,000,000 |               |  |      | 28,479,837 |      |  |      | 28,350,000 |      |  |   | 28,186,000 |   |  |   | 27,222,000 |   |  |   | 20,245,000 |  
|Net cash (used in) provided by operating
    activities      |  |                                   | (100      | )             |  |      | (1,347     | )    |  |      | 9,299      |      |  |   | 22,352     |   |  |   | 67,191     |   |  |   | 29,301     |  
|Net cash (used in) provided by investing
    activities      |  |                                   | (13,474   | )             |  |      | (21,888    | )    |  |      | 37,258     |      |  |   | 124,623    |   |  |   | (90,957    | ) |  |   | (182,524   | )
|Net cash (used in) provided by financing
    activities      |  |                                   | (1,221    | )             |  |      | 34,898     |      |  |      | (53,552    | )    |  |   | (140,617   | ) |  |   | 19,225     |   |  |   | 157,165    |  
|Total assets                                                 |  |                                   | 762,664   |               |  |      | 967,131    |      |  |      | 975,362    |      |  |   | 1,160,344  |   |  |   | 1,421,996  |   |  |   | 1,497,068  |  
|Long-term obligations                                        |  |                                   | 387,424   |               |  |      | 7,215      |      |  |      | 7,652      |      |  |   | 674,038    |   |  |   | 856,675    |   |  |   | 816,644    |  
|Liabilities subject to compromise                            |  |                                   | 93,816    |               |  |      | 926,387    |      |  |      | 925,894    |      |  |   |           |   |  |   |           |   |  |   |           |  
|Mandatorily redeemable 12.25% cumulative
    preferred stock |  |                                   | 126,510   |               |  |      |           |      |  |      |           |      |  |   |           |   |  |   |           |   |  |   |           |  
|Total liabilities                                            |  |                                   | 557,697   |               |  |      | 995,972    |      |  |      | 982,043    |      |  |   | 1,027,067  |   |  |   | 1,197,454  |   |  |   | 1,214,154  |  
|Total stockholders equity (deficit)                         |  |                                   | 78,457    |               |  |      | (28,841    | )    |  |      | (6,681     | )    |  |   | 136,880    |   |  |   | 224,542    |   |  |   | 283,767    |  

Item 7.     Managements
Discussion and Analysis of Financial Condition and Results of
Operations

General

The discussion in this section should be read in
conjunction with the Companys audited Consolidated
Financial Statements and related notes included in this
Form 10-K.

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The economic downturn which commenced in early
2001 and the aftermath of the terrorist attacks of
September 11, 2001 resulted in a sharp decline in lodging
demand in 2001 and continued to impact the Companys
operating results during 2002. In addition, the Companys
heavy debt load as well as hotel product issues, arising from a
lack of sufficient liquidity, all combined to place adverse
pressure on the Companys cash flows and liquidity.

Filing and emergence from
Chapter 11

On December 20, 2001, the Company and
substantially all of its subsidiaries which owned hotel
properties filed for voluntary reorganization under
Chapter 11 of the Bankruptcy Code.

Less than one year later, at a Confirmation
Hearing held on November 5, 2002, the Bankruptcy Court
confirmed the Companys First Amended Joint Plan of
Reorganization (the Joint Plan of Reorganization)
and, on November 25, 2002, the Company and entities owning
78 hotels officially emerged from Chapter 11. Pursuant to
the terms of the Reorganization, eight other wholly-owned hotels
were returned to lenders in January 2003 in satisfaction of
outstanding debt obligations and one hotel was returned to the
lessor of a capital lease.

Of the Companys 97 hotel portfolio, 18
hotels are owned by two subsidiaries (the Impac
Debtors) which were not part of the Joint Plan of
Reorganization and remain in Chapter 11 (the Impac
Hotels). The Impac Hotels represent approximately 19% of
the Companys total hotel properties and 14% of the
Companys total hotel rooms as of March 24, 2003. The
Impac Hotels contributed approximately 11.7% of the revenues
from the 105 properties comprising the Companys 2002
revenues. All of the Impac Hotels received financing prior to
the bankruptcy filing from one lender which has a claim of
$109.0 million against the Impac Debtors secured by the
Impac Hotels. The Company and the Impac Debtors have reached an
agreement with such lender which provides for a release of the
hotel collateral in exchange for the payment by the Impac
Debtors of an agreed amount (the Impac Settlement
Amount) by a date no later than May 31, 2003. If the
agreed amount is not paid by May 31, 2003, the Impac Hotels
will be returned to the lender in satisfaction of outstanding
mortgage obligations. On March 3, 2003, the Impac Debtors
filed a separate plan of reorganization (the Impac Plan of
Reorganization) pursuant to the terms of which the Company
and the Impac Debtors, through 18 newly-formed subsidiaries,
would obtain financing from Lehman Brothers Holdings Inc. (the
Lehman Financing), which would be used to pay the
Impac Settlement Amount. Though there can be no assurance, the
Company is hopeful that the Impac Plan of Reorganization will be
approved and the Lehman Financing successfully completed and,
accordingly, that the Company will be able to retain the Impac
Hotels.

The significant events which were effected upon
the Companys emergence from reorganization proceedings are
more fully discussed in the Liquidity and Capital Resources
section and in Note 2 of the Notes to the Consolidated Financial
Statements.

Stock Exchange Listing

On January 28, 2003, the Companys
newly issued common and preferred stocks were approved for
listing on the American Stock Exchange under the symbols,
LGN and LGN.pr.

Financial Comparison

Management believes that results of operations in
the hotel industry are best explained by three key performance
measures: occupancy, average daily rate (ADR) and
revenue per available room (RevPAR) levels. These
measures are influenced by a variety of factors including
national, regional and local economic conditions, the degree of
competition with other hotels in the area and changes in travel
patterns. The demand for accommodations is also affected by
normally recurring seasonal patterns and most of the
Companys hotels experience lower occupancy levels in the
fall and winter months (November through February) which may
result in lower revenues, lower net income and less cash flow
during these months.

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RevPAR is derived by dividing room revenues by
the number of available room nights for a given period or,
alternatively, by multiplying the occupancy by the ADR.


|                                                                                |  |                                    |         |          |  |           |          |          |  |           |       |    |  |   |         |   |  |  |       |   
|------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | -------- |  | --------- | -------- | -------- |  | --------- | ----- | -- |  | - | ------- | - |  |  | ----- | --
|                                                                                |  |                                   
|                                                                                |  | Years Ended December 31,          
|                                                                                |  |                                   
|                                                                                |  |                                    |         | % change |  |           |          | % change
|                                                                                |  | 2002                               |         | 2001     |  | 2002-2001 |          | 2000     |  | 2001-2000
|                                                                                |  |                                    |         |          |  |           |          |          |  |          
|                                                                                |  |                                   
|                                                                                |  | (In thousands, except percentages)
|Revenues                                                                        |  | $                                  | 409,771 |          |  | $         | 447,556  |          |  |           | (8.4  | )% |  | $ | 580,897 |   |  |  | (23.0 | )%
|Direct operating expenses                                                       |  |                                    | 163,982 |          |  |           | 174,282  |          |  |           | (5.9  | )% |  |   | 230,938 |   |  |  | (24.5 | )%
|General administrative and other expenses                                       |  |                                    | 172,672 |          |  |           | 194,835  |          |  |           | (11.4 | )% |  |   | 224,734 |   |  |  | (13.3 | )%
|Net income (loss)                                                               |  |                                    | 3,040   |          |  |           | (142,764 | )        |  |           | 102.1 | %  |  |   | (87,955 | ) |  |  | (62.3 | )%
|Revenue per available room (RevPAR)                                             |  | $                                  | 42.06   |          |  | $         | 45.08    |          |  |           | (6.7  | )% |  | $ | 49.62   |   |  |  | (9.1  | )%
|Average daily rates (ADR)                                                       |  | $                                  | 72.51   |          |  | $         | 75.28    |          |  |           | (3.7  | )% |  | $ | 76.73   |   |  |  | (1.9  | )%
|Occupancy                                                                       |  |                                    | 58.0    | %        |  |           | 59.9     | %        |  |           | (3.2  | )% |  |   | 64.6    | % |  |  | (7.3  | )%
|Number of hotels included at end of each year                                   |  |                                    | 105     |          |  |           | 105      |          |  |           |      |    |  |   | 111     |   |  |  | (5.4  | )%
|Same unit data (i.e. for the 105 hotels
    owned/managed at December 31, 2002) |  |                                    |         |          |  |           |          |          |  |           |       |    |  |   |         |   |  |  |       |   
|Revenues                                                                        |  | $                                  | 408,287 |          |  | $         | 440,513  |          |  |           | (7.3  | )% |  | $ | 483,239 |   |  |  | (8.8  | )%
|Revenue per available room (RevPAR)                                             |  | $                                  | 42.06   |          |  | $         | 45.13    |          |  |           | (6.8  | )% |  | $ | 49.24   |   |  |  | (8.3  | )%
|Average daily rates (ADR)                                                       |  | $                                  | 72.51   |          |  | $         | 75.32    |          |  |           | (3.7  | )% |  | $ | 76.08   |   |  |  | (1.0  | )%
|Occupancy                                                                       |  |                                    | 58.0    | %        |  |           | 59.9     | %        |  |           | (3.2  | )% |  |   | 64.7    | % |  |  | (7.4  | )%

Results of operations

The Company emerged from Chapter 11 on
November 25, 2002 and applied fresh start reporting
effective November 22, 2002 (the date that the exit
financing agreement was signed). As a result, all assets and
liabilities were recorded based on fair values. The Consolidated
Financial Statements subsequent to the Companys emergence
from Chapter 11 are those of a new reporting entity (the
Successor) and are not comparable with the financial
statements of the Company prior to the effective date of the
Joint Plan of Reorganization (the Predecessor). For
purposes of the discussion below, the Predecessors results
for the period January 1, 2002 to November 22, 2002
have been combined with the Successors results for the
period November 23, 2002 to December 31, 2002 (the
2002 combined period). The differences between
periods due to fresh start reporting are explained where
necessary.

The data in the table above, for 2002, presents
the results for the 2002 combined period. The same unit data
compares the results for the 2002 combined period with the
comparative periods for 2001 and 2000, but only for the hotels
that are included in the consolidated results for the 2002
combined period. The table supplements the comparison below
which provides a more detailed analysis and discussion of the
Companys results and liquidity for the 2002 combined
period and for the years ended December 31, 2001 and 2000
(referred to as 2001 and 2000,
respectively) . This discussion should be read in conjunction
with the Companys Audited Consolidated Financial
Statements and related notes set forth in Item 8.
Financial Statements and Supplementary Data included in
this Form 10-K.

Revenues

Revenues are comprised of room, food and beverage
and other revenues. Room revenues are derived from guest room
rentals, whereas food and beverage revenues primarily include
sales from hotel restaurants, room service, hotel catering and
meeting room rentals. Other revenues include charges for
guests long-distance telephone service, laundry and
parking.

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2002 combined
period compared to 2001

Revenues for the Company were $409.8 million
for the 2002 combined period, an 8.4% decrease in revenues from
$447.6 million for 2001. As shown in the preceding table,
the occupancy and average daily rates declined in the 2002
combined period compared with 2001. These reductions are
reflective of the economic recession, the aftermath of the
terrorist attack on September 11, 2001 and hotel product
quality issues due to liquidity constraints leading up to the
Companys Chapter 11 filing. Approximately 14 of
the Companys hotels are located in close proximity to
major airports and these hotels have been directly affected by
the decline in air travel. RevPAR has also been impacted by
renovations in progress at some of the Companys hotels.

2001 compared
to 2000

In addition to the factors described above,
revenues and RevPAR for 2001 were impacted by the Companys
previous strategic plans to reduce the size of its hotel
portfolio and Company debt which resulted in the sale of
twenty-five hotel properties between January 1, 2000 and
December 31, 2001.

Those plans caused a significant reduction in
revenues between 2001 and 2000. Specifically, revenues for the
Company were $447.6 million for 2001, a 23.0% decrease in
revenues from $580.9 million for 2000. Of this
$133.3 million decrease, approximately $90.6 million
was a result of the sale of hotels. Revenues on a same unit
basis, were $440.5 million for 2001 and $483.2 million
for 2000 (a decline of 8.8%). RevPAR, on a same unit basis, for
hotels owned at the end of 2001 declined by 8.3% compared with
2000 primarily as a result of a decline in occupancy of 7.4% as
well as a decrease in average daily rates of 1.0%.

Managements
response

Managements current strategies include
improving revenues through improved marketing strategies and
product quality. The corporate sales and revenue teams have been
aligned along brand lines to leverage the benefits that can be
gained from the respective flags. With the softening of the
transient demand, the sales focus and deployment is on
increasing group, contract and local corporate room night
consumption. A significant capital expenditure program has been
established to improve product quality and guest experience.

Operating
expenses

Operating expenses are comprised of direct,
general and administrative, other expenses and depreciation and
amortization. Direct expenses, including rooms, food and
beverage and other operations, reflect expenses directly related
to hotel operations. These expenses are primarily variable with
available rooms and occupancy rates, but also have a small fixed
component, which can be leveraged with increases in revenues.
General and administrative and other expenses primarily
represent property level expenses related to general operations
such as marketing, utilities, repairs and maintenance and other
property administrative costs. General administrative and other
expenses also include corporate salaries and other corporate
expenses which are generally fixed.

Direct operating expenses

2002 combined
period compared to 2001

Direct operating expenses for the Company were
$164.0 million (40% of revenues) for the 2002 combined
period and $174.3 million (38.9% of revenues) for 2001.
This $10.3 million decrease is primarily attributable to
the reduction in revenues.

2001 compared
to 2000

Direct operating expenses for the Company were
$174.3 million (38.9% of revenues) for 2001 and
$230.9 million (39.8% of direct revenue) for 2000. This
$56.6 million decrease is primarily attributable to the
reduction in revenues.

15



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Managements
response

Management has embarked on strategies to reduce
costs at the hotel level while remaining focused on guest
satisfaction. In March 2002, a purchasing director was hired.
Purchasing strategies have been implemented to capture the
synergies and efficiencies of national vendor contracts. Since
the Company has emerged from Chapter 11, the Company is in
a better position to negotiate more attractive purchasing
arrangements and terms with its vendors.

General, administrative and other
expenses

The property level component of general,
administrative and other expenses were lower in the 2002
combined period over 2001 and 2001 over 2000, primarily as a
result of reductions in revenues. Property level expenses
contain significant elements of fixed costs and therefore do not
reduce proportionately with revenues.

2002 combined
period compared to 2001

General, administrative and other expenses were
$172.7 million (42.1% of revenues) in the 2002 combined
period and $194.8 million (43.5% of revenues) in 2001. In
addition to the reduction due to lower revenues, general
administrative and other overheads for the 2002 combined period
declined as a result of significant reductions in corporate
overheads (declined by $18.4 million) due to certain
corporate cost reduction initiatives which were implemented at
the corporate office. These initiatives included reductions in
staffing, office space and technology costs. Insurance costs, an
element of general, administrative and other expenses, increased
by 38.7% ($2.7 million) effective with the policy renewal
in September 2002.

2001 compared
to 2000

General, administrative and other expenses were
$194.8 million (43.5% of revenues) in 2001 and
$224.7 million (38.7% of revenues) in 2000.

In addition to the reduction due to lower
revenues, general administrative and other overheads for 2001
were impacted by certain higher general, administrative and
other expenses, mainly utilities, insurance, franchise fees and
property taxes. Utility costs increased 21% in the first quarter
of 2001 due to higher usages caused by extreme winter conditions
in certain locations and increased energy rates. Insurance costs
increased due to premium increases in the global insurance
market. Franchise fees increased as a result of the prior year
conversion of certain hotels to franchise arrangements that have
slightly higher fee structures and certain changes in guest
awards by franchisors. Property taxes increased due to higher
property tax assessments in certain markets. Also, included in
general, administrative and other expenses were
$3.6 million of professional fees principally related to
consultants performing certain financial and accounting
management responsibilities within the Company,
$1.2 million relating to certain legal matters mainly in
respect of the HRB matter, and $3.2 million relating
principally to provisions for certain sales and other taxes and
receivable write-offs.

Included in general, administrative and other
expenses for 2000 were $7.5 million of professional fees
related to the completion of accounting, tax, systems and other
merger integration matters; $2.0 million related to legal
and other costs associated with two non-consummated transactions
(Whitehall and Edgecliff) and certain hotel asset dispositions;
and $2.6 million related principally to provisions for
certain sales and other taxes and receivable write-offs.

Depreciation and amortization
expenses

2002 combined
period compared to 2001

Depreciation and amortization expense was
$57.2 million in the 2002 combined period and
$62.5 million in 2001. This reduction is attributable to
reduced carrying values of certain assets arising from
impairment charges recorded in the fourth quarter of 2001 as
well as to a reduction in the number of hotels (six were sold in
2001). This decrease was offset by additional depreciation
related to capital improvements. Also,

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depreciation for the 2002 Successor period
declined as a result of the write-down of fixed assets recorded
on the implementation of fresh start reporting.


2001 compared
to 2000

Depreciation and amortization expense was
$62.5 million in 2001 and $64.8 million in 2000. The
$2.3 million decrease is a result of a decrease in
depreciation of $7.1 million related to hotels sold, net of
additional depreciation expense of $4.8 million relating to
six hotels previously considered held for sale and that were no
longer being actively marketed for sale.

Impairment of long-lived assets

2002 combined
period compared to 2001

No impairment charges were recorded during the
2002 combined period. However, the Companys implementation
of fresh start reporting resulted in a write-down of fixed
assets of $222.1 million. These charges are included in
reorganization items, which are discussed later. The impairment
charges for 2001 are discussed below as part of the comparison
between 2001 and 2000.

2001 compared
to 2000

Impairment of long-lived assets was
$67.3 million in 2001 and $60.7 million in 2000. The charge
for the 2001 period was comprised of $6.6 million related
to revised estimates of fair value for properties held for sale,
$4.0 million related to one property which was identified
as held for sale and also sold in 2001 and $69.0 million
relating to a charge to reduce the carrying value of certain of
the Companys hotels held for future use, offset by a
recapture of $12.3 million of impairment charges related to
six hotels that were previously considered held for sale that
were no longer being actively marketed for sale.

Of the impairment charges in the 2001 period,
$69.0 million of the impairment charges and the recapture
of $8.5 million of previously recognized impairment
reserves were recorded in the fourth quarter. Specifically in
connection with its bankruptcy petition on December 20,
2001, the Company determined that 29 of its hotels were
significantly overleveraged. Therefore, with the approval of the
Bankruptcy Court, the Company ceased paying interest to the
secured lenders of these properties from the date of the
bankruptcy petition. The Company also concluded that it no
longer had the ability to hold these hotels for a period
sufficient for their estimated future undiscounted cash flows to
cover their carrying values. Therefore, in accordance with the
provisions of SFAS No. 121, Accounting for the
Impairment or Disposal of Long-lived Assets to be Disposed
Of, the Company determined that an impairment charge of
$69.0 million was necessary to reduce the carrying value of
these assets. In connection with the bankruptcy petition, the
Company also ceased marketing for sale the remaining four
properties that were previously classified as held for sale.
Since these assets were not considered impaired as the estimated
future cash flows from the use of these properties exceeded
their carrying values, the Company recaptured $8.5 million
of impairment reserves previously recorded in 1999, 2000 and
2001.

Impairment charges for 2000 comprised
$11.3 million related to revised estimates of fair value
for properties held for sale at December 31, 1999,
$3.5 million related to one property held for use,
$56.6 million related to the ten hotels sold to Sunstone
Investors, LLC on August 31, 2000, net of a recapture of
$10.7 million of impairment charges recorded in 1999 and
2000 as seven hotels previously considered held for sale as of
December 31, 1999 were no longer being actively marketed
for sale.

Other income and expenses

Interest income and otherfor the 2002 combined period, 2001 and
2000 was $5.0 million, $0.7 million and
$1.5 million, respectively. The significant increase in the
2002 combined period relates primarily to a discharge of
indebtedness, recorded in the second quarter of 2002, in respect
of Macon Hotel Associates, LLC, a 60%-owned subsidiary. The
resulting gain on extinguishment of this indebtedness was
$4.4 million and

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resulted from the exchange of a promissory note
of $3.9 million plus related accrued interest approximating
$0.7 million in exchange for payment by Macon Hotel
Associates of $0.2 million.


Interest expense for the 2002 combined period
and for 2001was $32.1 million
and $75.3 million, respectively. This decrease is mainly
due to the treatment of highly leveraged debts while the Company
was in Chapter 11. Where the estimated value of the
underlying collateral in respect of certain debts was considered
to be less than the debt obligation, the Company ceased accruing
interest on those debts. Contractual interest expense in respect
of those debts that was not recorded for the 2002 combined
period (excluding interest on the CRESTS) approximated
$28.2 million. Recorded interest expense for the 2002
combined period versus 2001 was also less as a result of a
reduction in interest on variable rate debts as interest rates
declined during 2002.

Interest expense for 2001 and 2000 was$75.3 million and
$97.3 million, respectively. The $22.0 million
decrease over 2000 was primarily a result of the decrease in the
level of debt which occurred when the Company sold the six
hotels (including one of its largest) and used the proceeds to
pay down debt. To a lesser extent, interest expense for 2001 was
also impacted by a reduction in the cost of variable rate debt
in 2001 versus 2000.

The interest hedge break fee recorded in 2000of $4.3 million represents
amounts paid by the Company to break the interest rate lock
agreement on one of its credit facilities.

The acquisition termination fees of
$3.5 million recorded during 2000related to a reimbursement of expenses to Whitehall due to the
non-consummation of an agreement for the sale of the Company.

Gains on asset dispositions for the 2002
combined period, 2001 and 2000were
nil, $24.0 million and $0.3 million, respectively. The
gain for 2001 related primarily to the sale of one hotel in the
first quarter of 2001 (the Westin William Penn) and represents
the excess of the net proceeds of sale over the net book value
of assets sold.

Minority interest for the 2002 combined
period, 2001 and 2000was $(0.3)
million, $12.8 million and $13.1 million,
respectively. The significant change in the 2002 combined period
compared to the equivalent amounts for 2001 and 2000 is due to
the non-accrual of the CRESTS interest. The Company ceased
accruing interest on the CRESTS as these were considered to be
unsecured debts of the Company. CRESTS interest not accrued for
the 2002 combined period approximated $12.7 million.

Reorganization items The Company recorded all transactions
incurred as a result of the Chapter 11 filing and the
implementation of fresh start reporting, including the gain on
extinguishment of debt, as reorganization items and classified
these as one line item on its income statement. For the
Successor period (November 23, 2002 to December 31,
2002), such expenses are included in general administrative and
other expenses.

The table below summarizes the reorganization
items of the Predecessor Company for the period January 1,
2002 to November 22, 2002 and for the year ended
December 31, 2001 (amounts in thousands):

|                                                        |  |      |          |      |  |   |        | 
|------------------------------------------------------- |  | ---- | -------- | ---- |  | - | ------ | 
|                                                        |  | 2002 |          | 2001
|                                                        |  |      |          |     
|Gain on extinguishment of debt                          |  | $    | (256,430 | )    |  | $ |       | 
|Write-down of fixed assets (fresh start
    write-down) |  |      | 222,071  |      |  |   |       | 
|Fresh start adjustments  other                         |  |      | (3,938   | )    |  |   |       | 
|Write-off of deferred financing costs                   |  |      |         |      |  |   | 21,517 | 
|Legal and professional fees                             |  |      | 22,315   |      |  |   | 3,179  | 
|Other reorganization items                              |  |      | 3,292    |      |  |   | 320    | 
|                                                        |  |      |          |      |  |   |        | 
|                                                        |  | $    | (12,690  | )    |  | $ | 25,016 | 
|                                                        |  |      |          |      |  |   |        | 

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The extinguishment of debt, arising from the
application of fresh start reporting was comprised of (amounts
in thousands):

|                                                                                                      |  |   |          |  
|----------------------------------------------------------------------------------------------------- |  | - | -------- | -
|Liabilities subject to compromise (pre-emergence)                                                     |  | $ | 926,387  |  
|Liabilities settled and to be settled in cash and
    shares                                          |  |   | (489,503 | )
|Reinstated debt                                                                                       |  |   | (86,038  | )
|Remaining liabilities subject to compromise (for
    subsidiaries in Chapter 11 at December 31, 2002) |  |   | (94,416  | )
|                                                                                                      |  |   |          |  
|                                                                                                      |  | $ | 256,430  |  
|                                                                                                      |  |   |          |  

Income taxes

As of December 31, 2002, Lodgian had net
operating loss carry forwards of approximately $206 million
for federal income tax purposes, which expire in 2004 through
2021. Under the plan of reorganization, substantial amounts of
net operating losses were utilized to offset income from debt
cancellations. The Companys ability to use these net
operating loss carry forwards to offset future income is subject
to limitations which could increase over time. Due to these
limitations, a portion or all of these net operating loss carry
forwards could expire unused. In addition, the Company
recognized an income tax benefit of $1.3 million for the
2002 combined period, a provision of $2.8 million for 2001
and a tax benefit of $28.7 million for 2000. The benefit
for the 2002 combined period relates primarily to a reduction of
the provision recorded in 2001, for state income taxes.

Liquidity and Capital Resources

Lodgian utilizes its cash flows for operating
expenses, capital expenditures and debt service. The
Companys principal sources of liquidity consist of
existing cash balances and cash flow from operations.

The Company emerged from Chapter 11 on
November 25, 2002. Upon emergence, the following
significant events were effectuated:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | preferred shares totaling 5,000,000 (par value
    $0.01; initial liquidation value $25 per share) became available
    for issuance;                                                                                                                                                                                                                                                                                                                    
|
| |  | new common shares totaling 7,000,000 (par value
    $0.01) became available for issuance;                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Class A warrants to purchase 1,510,638
    shares of common stock at $18.29 per share, became available for
    issuance;                                                                                                                                                                                                                                                                                                                                
|
| |  | Class B warrants to purchase 1,029,366
    shares of common stock at $25.44 per share, became available for
    issuance;                                                                                                                                                                                                                                                                                                                                
|
| |  | the previous equity shares (28,479,837 in total)
    were cancelled and the previous stockholders received their pro
    rata share of 207,900 shares of common stock along with warrants
    to purchase 251,823 shares of common stock at $18.29 per share
    (Class A warrants) and warrants to purchase 778,304 shares
    of common stock at an exercise price of $25.44 per share
    (Class B warrants);                                         
|
| |  | the 12.25% Convertible Redeemable Equity
    Structured Trust Securities (CRESTS) were cancelled
    and the holders of the CRESTS received their pro rata share of
    868,000 shares of the common stock along with warrants to
    purchase 1,258,815 shares of common stock at $18.29 per share
    (Class A warrants) and warrants to purchase 251,062 shares
    of common stock at an exercise price of $25.44 per share
    (Class B warrants);
|
| |  | the Senior Subordinated Notes (the
    Notes) were cancelled and the holders of the Notes
    received their pro rata share of 4,690,600 shares of preferred
    stock and 5,557,511 shares of common stock;                                                                                                                                                                                                                                           
|
| |  | the holders of allowed general unsecured claims
    became entitled to 309,400 shares of preferred stock and 366,589
    shares of common stock;                                                                                                                                                                                                                                                                                                         

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Company closed on its $309.0 million
    exit financing arrangements with and through Merrill Lynch
    Mortgage Lending, Inc. (used to repay previous debt obligations,
    to fund payments of certain allowed claims and to fund portions
    of certain required cash escrows); this financing is secured by
    57 of the Companys hotels.                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Loans from lenders approximating
    $86.0 million, secured by 21 of the Companys hotels,
    were reinstated on their previous terms, except for the
    extension of certain maturities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | in accordance with AICPA, Statement of Position
    (SOP) 90-7, Financial Reporting by Entities in
    Reorganization Under the Bankruptcy Code, the Company
    implemented fresh start reporting effective November 22,
    2002 (the date on which the exit financing agreement was
    signed). As a result, assets and liabilities have been recorded
    based on fair values. The Consolidated Financial Statements
    subsequent to the Companys emergence from Chapter 11
    are those of a new reporting entity (the Successor)
    and are not comparable with the financial statements of the
    Company prior to the effective date of the Joint Plan of
    Reorganization (the Predecessor).

The Company applied fresh start reporting to all
its subsidiaries including those which were still in
Chapter 11 at the emergence date. The approximate
allocation of the Companys reorganization value, in
respect of all of its subsidiaries as of November 22, 2002
is shown below (amounts in thousands):

|                                                                          |  |   |         | 
|------------------------------------------------------------------------- |  | - | ------- | 
|Long-term debt                                                            |  | $ | 388,000 | 
|Liabilities subject to compromise                                         |  |   | 94,400  | 
|Post-petition liabilities including current
    portion of long-term debt |  |   | 84,500  | 
|Mandatorily redeemable 12.25% cumulative
    preferred stock              |  |   | 125,000 | 
|New equity including minority interest                                    |  |   | 93,100  | 
|                                                                          |  |   |         | 
|                                                                          |  | $ | 785,000 | 
|                                                                          |  |   |         | 

The proceeds from the exit financing facility of
$309.0 million arranged with and through Merrill Lynch
Mortgage Lending, Inc. (Merrill) were used primarily
to repay previous mortgage debts approximating
$262.3 million, to settle property tax claims and to fund
portions of the various cash escrows required under the exit
financing facility. The $309.0 million of exit financing is
comprised of three separate components as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Senior debt of $224.0 million which accrues
    interest at the rate of LIBOR plus 2.2442%, secured by, among
    other things, first mortgage liens on the fee simple and
    leasehold interests in 55 of the Companys hotels.                                                                                                                                                           
|
| |  | Mezzanine debt of $78.7 million which
    accrues interest at the rate of LIBOR plus 9.00% secured by the
    equity interest in the subsidiaries of the 56 hotels (the 55
    which secure the Senior Debt and one additional hotel).                                                                                                                                                      
|
| |  | Canadian debt provided through Computershare
    Trust Company of Canada, a Canadian lender, of
    $10.0 million Canadian dollars (equates to approximately
    $6.3 million U.S. dollars at December 31, 2002) which
    is a fixed interest facility, maturing in December 2007 and
    which accrues interest at the rate of 7.879% (secured by a
    mortgage on the Windsor property).

As permitted by the terms of the Senior and
Mezzanine debt created as part of the exit financing provided by
Merrill, the amounts of these loans may be adjusted or
resized prior to a securitization of the mortgage
loan. Merrill has exercised this right and the Senior and
Mezzanine debt were resized in March 2003. The principal amount
of the Mortgage Loan was decreased from $223.5 million
(initially $224.0 less $0.5 million of principal payments)
to $218.1 million, and the initial principal amount of the
Mezzanine Loan was increased from $78.7 million to
$84.1 million.

The Senior and Mezzanine debts, which together
approximated $302.7 million at origination, carry a blended
rate of LIBOR plus 4.00% and mature in November 2004. There are,
however, three one-year options to renew which could extend the
facility for an additional three years. The first option to
extend the maturity

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date of the Senior and Mezzanine debt by one year
(i.e. to November 2005) is available only if no events of
default occur in respect of the payments of principal, interest
and other required payments. The second and third extension
terms are available only if no events of default (as defined by
the agreement) exist and are subject to minimum Debt Service
Coverage Ratio and Debt Yield requirements. Payments of
principal and interest on all three portions of the facility are
due monthly; however, the principal payments on the Senior and
Mezzanine debts may be deferred during the first twelve months
of the agreement. The Senior and Mezzanine debt agreements
provide that when either the Debt Yield (as defined) for the
trailing 12-month period is below 12.75% during the first year
of the loan ending November 2003 (13.25% during the second year)
or the Debt Service Coverage Ratio (as defined) is below 1.20,
excess cash flows (after payment of operating expenses,
management fees, required reserves, principal and interest)
produced by the 56 properties must be deposited in a special
deposit account and cannot be transferred to the parent company,
but can be used for capital expenditures on these properties
with lenders approval, or principal and interest payments.
Funds placed into the special deposit account are released to
the borrowers when the Debt Yield and the Debt Service Coverage
Ratio are above the minimum requirements for three consecutive
months. The Company anticipates that as of March 31, 2003,
the Debt Yield for the 56 properties will be below the 12.75%
threshold and, therefore, any excess cash produced by the 56
properties will be retained in the special deposit account until
the Debt Yield is above the minimum.


The Company, through its wholly owned
subsidiaries, owes approximately $11.4 million under
Industrial Revenue Bonds (IRBs) issued on the
Holiday Inn Lawrence, Kansas and Holiday Inn Manhattan, Kansas
properties. The IRBs require a minimum debt service
coverage ratio (DSCR) (as defined). For the year
ended December 31, 2002, the cash flows of the two
properties were insufficient to meet the minimum DSCR
requirements due in part to renovations that were being
performed at the properties during 2002. The trustee of the
IRBs may give notice of default at which time the Company
could remedy the default by depositing with the trustee an
amount estimated at less than $1 million. In the event a default
is declared and not cured, the properties could be subject to
foreclosure and the Company would be obligated pursuant to a
partial guaranty in an amount not to exceed $1.4 million.

The new preferred stock accumulates dividends at
the rate of 12.25%, is cumulative and is compounded annually.
The dividend payable on November 25, 2003 is payable via
the issuance of additional shares of preferred stock. The board
of directors will determine whether the dividends due in
November 2004 and 2005 will be paid in cash or via additional
shares of preferred stock. The new preferred stock is subject to
redemption at any time, at the Companys option (including
a premium during the first five years) and to mandatory
redemption on November 25, 2012. If the preferred stock is
redeemed during the first year, the premium payable is 5%, and
the premium is reduced by 1% each succeeding year through 2007.
This premium percentage would be applied against the preferred
stock plus any dividends outstanding. The financial statements
for the Successor period include an accrual for the preferred
stock dividend as a direct charge against retained earnings.

Until the remaining entities exit from
Chapter 11 and the claims distribution process is complete,
the Company will continue to make payments in respect of cash
claims, professional costs relating to the entities in
Chapter 11, the claims process as well as professional fees
relating to the distribution of shares.

The Company intends to use its cash for ongoing
operations, debt service and capital expenditures and does not
anticipate paying dividends on the new common stock in the near
future.

The Company may consider the possible sale of one
or more hotel properties in order to, among other things,
decrease total outstanding debt and eliminate less successful
properties from the portfolio.

Net cash used in operating activities in the 2002
combined period was $1.4 million and net cash provided by
operating activities was $9.3 million in 2001.

Cash flows used in investing activities were
$35.4 million for the 2002 combined period and net cash
provided by investing activities was $37.3 million in 2001.
Investing activities for both the 2002 combined period and 2001
include significant capital expenditure on the Companys
hotels ($28.1 million and $28.8 million,
respectively). For 2001, this was offset by net proceeds of
$67.9 million from the sale of 6 hotel

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assets. The remainder of the Companys
investment activities for the 2002 combined period and for 2001
relates primarily to deposits for capital expenditure escrows
($5.5 million and $1.8 million, respectively),
investment in new franchises and other deposits.


Cash flows provided by financing activities for
the 2002 combined period were $33.7 million and cash flows
used in financing activities for 2001 were $53.6 million.
Cash flows for financing activities for the 2002 combined period
and for 2001 consisted primarily of the net proceeds from the
issuance and repayment of long-term obligations, as well as
payments of deferred loan fees. For the 2002 combined period,
the proceeds from issuance of long-term obligations of
$309.1 million was primarily a result of the new exit
financing facility while the repayment of long-term debt of
$266.0 million primarily related to previous debt repaid
from the proceeds of the exit financing. The payment of deferred
loan fees and other loan closing costs were also primarily
related to the exit financing.

At December 31, 2002, the Company had a
working capital deficit of $9.6 million compared with a
working capital surplus of $50,000 at December 31, 2001.
The reduced working capital position is primarily due to the
reclassifications of certain liabilities previously subject to
compromise at December 31, 2001 to current liabilities at
December 31, 2002, as a result of allowed claims pursuant
to the Joint Plan of Reorganization.

The Company has a capital improvement program to
address the capital improvements required at the hotels related
to product improvement plans specified by license agreements
with franchisors, re-branding of several hotels and general
renovation projects intended to ultimately improve the
operations of the hotels. As of December 31, 2002, the
Companys anticipated expenditures for such projects during
the two years ending December 2004 are approximately
$61.6 million and the Company has approximately
$21.3 million escrowed for such improvements. The Company
expects to fund its capital expenditures from a combination of
amounts escrowed for such expenditures, its current cash
position and cash from operations. However, should the Company
not be able to complete certain capital expenditures as required
by its franchise license agreements, the applicable franchisor
could seek to terminate such agreement. In this event, if the
Company is unable to replace the terminated franchise agreement
with a new agreement acceptable to the lender, the Company could
be in default of one or more loan agreements.

Management believes that the combination of its
current cash position, cash flow from operations and capital
expenditure escrows will provide sufficient liquidity to fund
the Companys operating, capital expenditure and debt
service obligations through 2003.

The Companys ability to make scheduled
principal payments, to pay interest on, or to refinance the
Companys indebtedness, depends on its future performance
and financial results, which, to a certain extent, are subject
to general conditions in or affecting the hotel and vacation
industry and to the general economic, political, financial,
competitive, legislative and regulatory environment. These
factors, including the severity and duration of the current
economic downturn are beyond the Companys control.

Maturities of long-term obligations for each of
the five years after December 31, 2002, and thereafter are
as follows (amounts in thousands):

|                      |  |   |         | 
|--------------------- |  | - | ------- | 
|2003                  |  | $ | 14,550  | 
|2004                  |  |   | 326,667 | 
|2005                  |  |   | 4,048   | 
|2006                  |  |   | 4,429   | 
|2007                  |  |   | 13,328  | 
|Thereafter            |  |   | 38,952  | 
|                      |  |   |         | 
|                      |  |   | 401,974 | 
|Subject to compromise |  |   | 91,421  | 
|                      |  |   |         | 
|                      |  | $ | 493,395 | 
|                      |  |   |         | 

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At December 31, 2002, the future minimum
commitments for non-cancellable ground, parking and other leases
were as follows (amounts in thousands):

|           |  |   |        | 
|---------- |  | - | ------ | 
|2003       |  | $ | 2,929  | 
|2004       |  |   | 3,026  | 
|2005       |  |   | 3,060  | 
|2006       |  |   | 3,076  | 
|2007       |  |   | 3,059  | 
|Thereafter |  |   | 78,691 | 
|           |  |   |        | 
|           |  | $ | 93,841 | 
|           |  |   |        | 

Inflation

The Company cannot determine the precise impact
of inflation. However, the Company believes that the rate of
inflation has not had a material effect on its revenues or
expenses in recent years. It is difficult to predict whether
inflation will have a material effect on the Companys
results in the long-term.

New
Accounting Pronouncements

In June 2001, SFAS No. 142 Goodwill
and other Intangible Assets (effective for fiscal years
beginning after December 15, 2001) was issued. SFAS
No. 142 specifies that goodwill and intangible assets with
indefinite lives will no longer be amortized but instead will be
subject to periodic impairment testing. SFAS No. 142 was
adopted by the Company in the first quarter of 2002. The
adoption had no impact on the Companys financial
statements.

In August 2001, SFAS No. 143,
Accounting for Asset Retirement Obligations,
(effective for fiscal periods commencing after June 15,
2002) was issued. SFAS No. 143 requires that entities
recognize the fair value of a liability for an asset retirement
obligation in the period in which it is incurred if a reasonable
estimate of fair value can be made. We believe that the adoption
of SFAS No. 143 did not have a significant impact on the
Companys financial statements.

In August 2001, SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived
Assets, (effective for fiscal periods commencing
December 15, 2001) was issued. SFAS No. 144 addresses
financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of.
The statement supersedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, and among other factors, establishes
criteria beyond that previously specified in SFAS No. 121
to determine when a long-lived asset is to be considered held
for sale. We currently believe that SFAS No. 144 requires
the operating results of real estate assets sold to be included
in discontinued operations in the statements of operations. The
adoption had no impact on these financial statements but will
impact the financial statements for the year ended
December 31, 2003.

In April 2002, SFAS No. 145 Rescission
of SFAS No. 4, 44, 64 and Amendment of SFAS No. 13 and
Technical Corrections was issued. SFAS No. 145
prevents treatment as extraordinary, gains or losses on
extinguishment of debt not meeting the criteria of APB 30. SFAS
145 is effective for fiscal years beginning after May 15,
2002. The Company was required to adopt SFAS No. 145 on
November 22, 2002 upon its emergence from Chapter 11.
As a result, the gain on extinguishment of debt of
$256.4 million associated with the Companys emergence
from Chapter 11 was recorded in the period January 1,
2002 to November 22, 2002 (Predecessor), within
reorganization items. Additionally, a $4.4 million gain on
extinguishment of debt relating to Macon Hotel Associates was
recorded in interest income and other.

In June 2002, SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities, was
issued. SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities
and nullifies Emerging Issue Task Force (EITF) Issue
No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including certain costs incurred

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in a restructuring). SFAS No. 146
requires recognition of a liability for a cost associated with
an exit or disposal activity when the liability is incurred as
opposed to when the entity commits to an exit plan under EITF
Issue No. 94-3. The Company will be required to adopt SFAS
No. 146 for exit or disposal activities initiated after
November 22, 2002 upon the emergence from Chapter 11.
The Company has determined that there is no current impact of
adopting SFAS No. 146. However, SFAS No. 146 will
impact the accounting for future restructuring activities.


In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others
(FIN 45) which elaborates on the disclosures to
be made by a guarantor in its financial statements. It also
requires a guarantor to recognize a liability for the fair value
of the obligation undertaken in issuing the guarantee at the
inception of a guarantee. The disclosure requirements of FIN 45
are effective for the Company as of December 31, 2002. The
recognition provisions of FIN 45 will be applied on a
prospective basis to guarantees issued after December 31,
2002. The Company does not expect the requirements of
FIN 45 to have a material impact on its financial position
and results of operations.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS
No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods
of transition for an entity that voluntarily changes to the
fair-value-based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of SFAS
No. 123 to require prominent disclosure about the effects
on reported net income and earnings per share and the
entitys accounting policy decisions with respect to
stock-based employee compensation. Certain of the disclosure
requirements are required for all companies, regardless of
whether the fair value method or intrinsic value method is used
to account for stock-based employee compensation arrangements.
The Company continues to account for its employee incentive
stock option plans using the intrinsic value method in
accordance with the recognition and measurement principles of
APB Opinion No. 25, Accounting for Stock Issued to
Employees. The amendments to SFAS No. 123 will be
effective for financial statements for fiscal years ended after
December 15, 2002 and for interim periods beginning after
December 15, 2002. The Company was required to adopt SFAS
No. 148 on November 22, 2002 upon its emergence from
Chapter 11.

Critical Accounting Policies

The Companys financial statements are
prepared in accordance with accounting principles generally
accepted in the United States (GAAP). A summary of
the significant accounting policies is included in Note 1
of the Notes to the Consolidated Financial Statements. The
preparation of the financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting
period. There can be no assurance that actual results will not
differ from these estimates. The Company believes the following
to be its critical accounting policies:

Capitalization
and depreciable lives of assets

Capital improvements are capitalized when they
extend the useful lives of the related asset. Management
estimates the depreciable lives of the Companys fixed
assets. All items considered to be repair and maintenance items
are expensed as incurred. Depreciation is computed using the
straight-line method over the estimated useful lives of the
assets (buildings and improvements 10-40 years; furnishings and
equipment 3-10 years). Property under capital leases is
amortized using the straight-line method over the shorter of the
estimated useful lives of the assets or the lease term.

Revenue
recognition

Revenues are recognized when the services are
rendered. Revenues are comprised of room, food and beverage and
other revenues. Room revenues are derived from guest room
rentals, whereas food and beverage revenues primarily include
sales from hotel restaurants, room service, hotel catering and
meeting room rentals. Other revenues include charges for
guests long-distance telephone service, laundry and
parking.

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Asset
impairment evaluation

Under GAAP, real estate assets are stated at the
lower of depreciated cost or fair value, if deemed impaired. As
required by GAAP, the Company periodically evaluates its real
estate assets to determine if there has been any impairment in
carrying value and records impairment losses if there are
indicators of impairment and the undiscounted cash flows
estimated to be generated by those assets are less than the
assets carrying amounts. In connection with the
Companys emergence from Chapter 11, and the
application of fresh start reporting, the Company recorded a net
write-down of $222.1 million. This write-down is included
in reorganization items in the statement of operations. The
impairment loss recognized in 2001 and 2000 was
$67.3 million and $60.7 million, respectively.

Of the impairment charges in the 2001 period,
$69.0 million of the impairment charges and the recapture
of $8.5 million of previously recognized impairment
reserves were recorded in the fourth quarter. Specifically in
connection with its bankruptcy petition on December 20,
2001, the Company determined that 29 of its hotels were
significantly overleveraged. Therefore, with the approval of the
Bankruptcy Court, the Company ceased paying interest to the
secured lenders of these properties from the date of the
bankruptcy petition. The Company also concluded that it no
longer had the ability to hold these hotels for a period
sufficient for their estimated future undiscounted cash flows to
cover their carrying values. Therefore, in accordance with the
provisions of Statement of Financial Accounting Standards
(SFAS) No. 121, the Company determined that an
impairment charge of $69.0 million was necessary to reduce
the carrying value of these assets. In connection with the
bankruptcy petition, the Company also ceased marketing for sale
four properties that were previously classified as held for
sale. Since these assets were not considered impaired as the
estimated future cash flows from the use of these properties
exceeded their carrying values, the Company recaptured
$8.5 million of impairment reserves previously recorded in
1999, 2000 and 2001.

Income
taxes

The Company accounts for income taxes under
SFAS 109 Accounting for Income Taxes, which
requires the use of the liability method of accounting for
deferred income taxes. See Note 11 of the Notes to the
Consolidated Financial Statements for the components of the
Companys deferred taxes. As a result of the Companys
history of losses, the Company has provided a full valuation
allowance against its deferred tax asset as it is more likely
than not that the deferred tax asset will not be realized.

The list of critical accounting policies above is
not intended to be a comprehensive list of all of the
Companys accounting policies. In many cases, the treatment
of a particular transaction is specifically determined by
generally accepted accounting principles with no need for
managements judgment in selecting from alternatives which
would provide different results.

Risk Factors

This Form 10-K contains a number of
statements about the future. These statements are
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act. These include
managements expectations, statements that describe
anticipated revenues, capital expenditures and other financial
items, statements that describe the Companys business
plans and objectives, and statements that describe the expected
impact of competition, government regulation, litigation and
other factors on the Companys future financial condition
and results of operations. The words may,
should, expect, believe,
anticipate, project,
estimate, and similar expressions are intended to
identify forward-looking statements. Certain factors are not
within the Companys control and hence readers are
cautioned not to put undue reliance on forward-looking
statements. The following represents a list of risks and
uncertainties which could either individually or together cause
actual results to differ materially from those described in the
forward-looking statements (note: this list is not intended to
be an exhaustive list of all the possible risks and
uncertainties).

25



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##### Table of Contents





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | The value of hotels and the successful
    repayment of mortgage loans are dependent upon the successful
    operation of the hotels

The value of hotels is heavily dependent on the
cash flows generated by the hotels. If cash flow declines, the
hotel values could suffer impairment and the ability to repay
the related debt could also be adversely impacted. Factors
affecting the performance of hotels include, but are not limited
to, construction of a competing hotel, loss of franchise
affiliations, the need for renovations, deterioration in hotel
management, changes in travel patterns and adverse economic
conditions.

The
Companys revenue generating capabilities is dependent on
its ability to retain its franchise affiliations

Management believes that Lodgians strong
brand affiliations bring many benefits in terms of guest loyalty
and market share premiums. With 80% of the Companys
portfolio comprised of Crowne Plaza, Holiday Inn and Marriott
brand hotels, the Company is able to take advantage of superior
brand equity, quality standards and reservation contribution.
The Companys hotels also benefit from franchisors
central reservation offices, their global distribution systems
and brand internet booking sites. These together contribute
approximately 30% of the Companys total reservations for
these brands.

The Company is subject to certain property
maintenance and quality standard compliance requirements under
its franchise agreements. The Company periodically receives
notifications from its franchisors of events of noncompliance
with such agreements. In selected situations, as warranted,
based on economic evaluations, management may elect to not
comply with the franchisor requirements. In such situations, the
Company will either select an alternative franchisor or operate
the property independent of any franchisor.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Interest rate increases will increase the
    cost of current and future debt

A significant portion of the Companys
indebtedness is subject to adjustable interest rates and is
secured by a substantial number of its operating assets. The
Company anticipates that its future borrowings will be at
interest rates which adjust with certain indices. Therefore, the
cost of financing will vary subject to events which are beyond
the Companys control. While interest rates have declined
markedly in the past year, changes in economic conditions could
result in higher interest rates which could increase debt
service requirements on floating rate debt and could reduce cash
available for distribution. Adverse economic conditions could
also cause the terms on which borrowings are available to be
unfavorable. In those circumstances, if the Company needed
capital to repay indebtedness, it could be required to sell one
or more of its hotels which could result in a lower than optimum
return on its investments.



| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Environmental, state and federal
    regulations could adversely affect the Companys
    operations

The Companys hotels are subject to certain
federal, state and local regulations which require the Company
to obtain and maintain various licenses and permits. All such
licenses and permits must be periodically renewed and may be
revoked or suspended for cause at any time. Certain of these
licenses and permits are material to the Companys business
and the loss of such licenses could have a material adverse
effect on the Companys financial condition and results of
operations.

Lodgian is also subject to certain federal and
state labor laws and regulations such as minimum wage
requirements, regulations relating to working conditions, laws
restricting the employment of illegal aliens and the Americans
with Disabilities Act. As a provider of restaurant services, the
Company is also subject to certain federal, state and local
health laws and regulations. Lodgian is also subject in certain
states to dramshop statutes, which may give an injured person
the right to recover damages from any establishment which
wrongfully served alcoholic beverages to a person who, while
intoxicated, caused the injury.

Federal and state environmental regulations
potentially impose cleanup costs for hazardous waste
contamination on property owners. If any material hazardous
waste contamination problems do exist on any of the
Companys properties, the Company may be exposed to
liability for the costs associated with the cleanup of such
sites.

26



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##### Table of Contents





| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | The holders of the Companys common
    stock could exercise significant control over the Company and
    could sell large blocks of shares

The former holders of the Senior Subordinated
Notes own 79.39% of the new common stock and 93.81% of the
preferred stock. If holders of a significant number of our
common stock act as a group, these holders could be in a
position to significantly influence corporate actions requiring
shareholder approval including the election of directors. In
addition, if holders of the common and preferred stock elect to
sell large blocks of common and preferred stock, this could have
an adverse effect on the stock price of these Securities.



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | The public market for the Companys
    new securities has existed for a short time

The public market for the new common and
preferred stock was initiated by listing on the American Stock
Exchange (AMEX) on January 28, 2003. There can
be no assurance that an active market will develop for the
common and preferred stock or that these market prices will be
sustained.

The
Companys common stock could be de-listed from the Amex if
the listing standards are not maintained

The rules of the AMEX allow the AMEX to de-list
securities if it determines that a companys securities
fail to meet certain guidelines in respect of corporate net
worth, public float, number of shareholders, aggregate market
value of shares or price per share. The Company cannot assure
purchasers of the common and preferred stock that it will
continue to meet these requirements.



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | The Company does not have employment
    agreements with all of its key management

The Company depends on the continuing efforts of
its executives and senior management. The departure of these
individuals could adversely affect the Companys business,
particularly if the Company is not able to attract qualified
replacements.



| |                                                                              
| | -----------------------------------------------------------------------------
| | A prolonged economic downturn could have an
    adverse effect on the Company

A weakening economy could continue to affect
travel and lodging demand which could adversely impact the
Companys revenues and ultimately the value of its
properties.



| |                                                                          
| | -------------------------------------------------------------------------
| | The Company is self insured in respect for
    certain types of insurance

The Company is self insured up to certain limits
(deductibles) with respect to employee medical, employee
dental, property insurance, general liability insurance,
personal injury claims, workers compensation and auto
liability. Should unanticipated events cause these claims to
escalate beyond normal expectations, the Companys
financial condition and results of operations could be adversely
affected.

The Company
may not be able to retain all of the hotels owned by the Impac
Debtors

The Impac Debtors own eighteen hotels of the
Companys portfolio. All of the eighteen properties owned
by the Impac Debtors received financing from one lender prior to
the bankruptcy filing, and the Company and the Impac Debtors
have reached an agreement with such lender which provides for a
release of the hotel collateral in exchange for the payment of
the Settlement Amount by a date no later than May 31, 2003.
If the agreed amount is not paid by May 31, 2003, the
eighteen hotel properties will be returned to the lender in
satisfaction of outstanding mortgage obligations. If the Company
is not able to retain these properties, the Company may lose
valuable assets and have fewer properties to contribute to
overhead.



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

The lodging industry is highly competitive.
Competitive factors within the industry include: room rates,
quality of accommodations, name recognition, service levels,
reputation, amenities, reservation systems, convenience of
location, and the supply and availability of alternative
lodging. Levels of demand are dependent upon many factors
including general and local economic conditions and changes in
levels of tourism and

27



---



##### Table of Contents



business-related travel. The hotels depend upon
both commercial and tourist travelers for revenues. Generally,
the hotels operate in areas that contain numerous other
competitive lodging facilities, including hotels associated with
franchisors which may have more extensive reservation systems.


Competition within the lodging market has
increased substantially and may increase in the foreseeable
future. We cannot guarantee that new or existing competitors
will not significantly reduce their rates or offer greater
convenience, services or amenities or significantly expand or
improve hotels in the markets in which we currently or may
subsequently compete, thereby materially and adversely affecting
our business and results of operations.



| |                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The short operating history since the
    Companys emergence from Chapter 11 may be
    insufficient to evaluate the Companys financial condition
    based on the Companys financial statements

The Company emerged from Chapter 11
protection on November 25, 2002 and applied fresh start
reporting effective November 22, 2002. The Successors
financial statements included in this Form 10-K span the
period November 23, 2002, to December 31, 2002. This
short operating history may be insufficient to evaluate the
Companys financial condition and results of operations.



| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | The onset of war and terrorist activity
    could have a material adverse affect on the Companys
    financial condition and results of operations

The onset of war could further weaken the
Companys financial condition and results of operations
which have already been weakened as a result of the terrorist
attacks that occurred on September 11, 2001 and the
weakening in the U.S. economy.



| |                                                                           
| | --------------------------------------------------------------------------
| | The Company will have significant
    post-reorganization debt obligations

Although the Company is substantially less
leveraged as a result of the voluntary reorganization, the
Company cannot provide assurances that its operating cash flows
will be adequate to pay the principal and interest payments
under the post reorganization indebtedness when due, as well as
to fund all contemplated capital expenditures. The failure to
make necessary capital expenditures could have a material
adverse effect on the ability of the Company to remain
competitive.



| |                                                            
| | -----------------------------------------------------------
| | The Company will have limited access to
    working capital

The Company is expected to require certain
amounts of working capital. While the Company anticipates that
sufficient funds to meet its working capital needs for the
foreseeable future will be available from the cash generated by
the businesses of the reorganized Company and from the exit
financing facility, the ability of the Company to gain access to
additional working capital, if needed, cannot be assured,
particularly in view of competitive factors, industry conditions
and the restrictive terms of the exit financing facility.



| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company may not be able to meet certain
    requirements imposed by its franchisors and therefore could lose
    the right to operate one or more hotels under a national
    flag

The terms of the Companys franchise
agreements require each hotel to meet certain quality and guest
satisfaction standards. In addition, as part of the
reorganization process, the Company entered into stipulations
with each of its major franchisors setting forth a timeline as
to completion of certain capital expenditures. There can be no
assurance that the Company will have sufficient liquidity to be
able to meet its capital expenditure or other requirements, and
the Company could lose the right to operate certain hotels under
nationally recognized brand names. Furthermore, the termination
of one or more franchise agreements could trigger a default
under certain loan agreements as well as obligations to pay
liquidated damages under the franchise agreements.

As of March 24, 2003, the Company was not in
strict compliance with the terms of eighteen of its franchise
agreements and has received termination notices from franchisors
with respect to six of these eighteen properties. There can be
no assurance that the Company will be able to complete its
action plans to

28



---



##### Table of Contents



cure the alleged defaults prior to the specified
termination dates or be granted additional time in which to cure
any defaults.


Item 7A.     Quantitative
and Qualitative Disclosures About Market Risk

The risk inherent in the Companys market
risk sensitive instruments is the potential loss arising from
adverse changes in interest rates. In connection with the exit
financing arranged with and by Merrill Lynch Mortgage Lending,
Inc., in November 2002, the Company purchased two interest rate
cap agreements. These instruments have the effect of limiting
the interest rate exposure associated with the Senior and the
Mezzanine portion of the exit financing so that the interest
payable on these obligations is variable only up to a LIBOR rate
of 6.4375% plus the applicable spread. The notional amounts of
the two interest rate caps and their termination dates match the
principal amounts and maturities of the outstanding amounts on
these loans. The fair value of these two instruments at
December 31, 2002 approximated $0.1 million.

In addition, the hotel business is inherently
capital intensive, as the vast majority of assets are hotels,
which are long-lived. Lodgians exposure to market risk
associated with changes in interest rates relates primarily to
its debt obligations. Approximately 64% of the long-term debt
carries floating rates of interest. For the balance of long-term
debt, the nature of fixed rate obligations does not expose the
Company to the risk of changes in the fair value of these
instruments. The Company has outstanding debt of $493.4 million,
at December 31, 2002, including current maturities and debt
subject to compromise.

The table below provides information about the
Companys debt obligations subsequent to its emergence from
Chapter 11:

|                                                                                                            |  |                |         |          |  |            |         |                |  |      |        |      |  |      |        |      |  |            |         |  |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 
|----------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | -------- |  | ---------- | ------- | -------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---------- | ------- |  |  | - | ----- |  |  | - | ----- |  |  | - | ------ |  |  | - | ------ | 
|                                                                                                            |  |                |         |          |  |            |         |               
|                                                                                                            |  |                |         |          |  |            |         | Maturity dates
|                                                                                                            |  |                |         |          |  | Subject to |         |               
|                                                                                                            |  | Fair value     |         | Total(1) |  | compromise |         | 2003           |  | 2004 |        | 2005 |  | 2006 |        | 2007 |  | Thereafter
|                                                                                                            |  |                |         |          |  |            |         |                |  |      |        |      |  |      |        |      |  |           
|                                                                                                            |  |               
|                                                                                                            |  | (In thousands)
|Exit financing  Mortgage notes payable
    with interest at LIBOR plus 2.2442%  matures November
    2004 |  | $              | 224,036 |          |  | $          | 224,036 |                |  | $    |       |      |  | $    | 2,313  |      |  | $          | 221,723 |  |  | $ |      |  |  | $ |      |  |  | $ |       |  |  | $ |       | 
|Exit financing  Mortgage notes payable
    with interest at LIBOR plus 9%  matures November 2004          |  |                | 78,671  |          |  |            | 78,671  |                |  |      |       |      |  |      | 812    |      |  |            | 77,859  |  |  |   |      |  |  |   |      |  |  |   |       |  |  |   |       | 
|Exit financing  Mortgage notes payable
    with interest at 7.879%  matures December 2007                 |  |                | 6,339   |          |  |            | 6,339   |                |  |      |       |      |  |      | 169    |      |  |            | 182     |  |  |   | 197   |  |  |   | 213   |  |  |   | 5,578  |  |  |   |       | 
|Liabilities subject to compromise                                                                           |  |                | 91,421  |          |  |            | 91,421  |                |  |      | 91,421 |      |  |      |       |      |  |            |        |  |  |   |      |  |  |   |      |  |  |   |       |  |  |   |       | 
|Mortgage notes 7.3%  10.7%                                                                                 |  |                | 91,320  |          |  |            | 82,887  |                |  |      |       |      |  |      | 3,624  |      |  |            | 26,869  |  |  |   | 3,818 |  |  |   | 4,216 |  |  |   | 7,750  |  |  |   | 36,610 | 
|Mortgage notes  prime plus 0.25%                                                                           |  |                | 7,447   |          |  |            | 7,447   |                |  |      |       |      |  |      | 7,447  |      |  |            |        |  |  |   |      |  |  |   |      |  |  |   |       |  |  |   |       | 
|Other                                                                                                       |  |                | 2,594   |          |  |            | 2,594   |                |  |      |       |      |  |      | 185    |      |  |            | 34      |  |  |   | 33    |  |  |   |      |  |  |   |       |  |  |   | 2,342  | 
|                                                                                                            |  |                |         |          |  |            |         |                |  |      |        |      |  |      |        |      |  |            |         |  |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 
|                                                                                                            |  | $              | 501,828 |          |  | $          | 493,395 |                |  | $    | 91,421 |      |  | $    | 14,550 |      |  | $          | 326,667 |  |  | $ | 4,048 |  |  | $ | 4,429 |  |  | $ | 13,328 |  |  | $ | 38,952 | 
|                                                                                                            |  |                |         |          |  |            |         |                |  |      |        |      |  |      |        |      |  |            |         |  |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 

(1) Comprises:

|                                  |  |   |         | 
|--------------------------------- |  | - | ------- | 
|Current portion of long term debt |  | $ | 14,550  | 
|Liabilities subject to compromise |  |   | 91,421  | 
|Long-term debt                    |  |   | 387,424 | 
|                                  |  |   |         | 
|                                  |  | $ | 493,395 | 
|                                  |  |   |         | 

At December 31, 2002, the Company had
approximately $310.2 million of debt instruments
outstanding that are subject to changes in the LIBOR or PRIME
rate. Without regard to additional borrowings under those
instruments or scheduled amortization, the annualized effect of
each twenty five basis point increase in the LIBOR rate would be
a reduction in income before income taxes by approximately
$0.8 million.

29



---



##### Table of Contents



Item 8.     Financial
Statements and Supplementary Data

The Consolidated Financial Statements of the
Company are included as a separate section of this report
commencing on page F-1.



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

There were no disagreements with accountants
during the periods covered by this report on Form 10-K. On
June 6, 2002, the Company terminated the services of Arthur
Andersen LLP and appointed Deloitte and Touche LLP.




PART III

Item 10.     Directors
and Executive Officers of the Registrant

Information about our Directors and Executive
Officers is incorporated by reference from the discussion in our
proxy statement for the 2003 Annual Meeting of Shareholders.

Item 11.     Executive
Compensation

Information about Executive Compensation is
incorporated by reference from the discussion in our proxy
statement for the 2003 Annual Meeting of Shareholders.

Item 12.     Security
Ownership of Certain Beneficial Owners and
Management

Information about security ownership of certain
beneficial owners and management is incorporated by reference
from the discussion in our proxy statement for the 2003 Annual
Meeting of Shareholders.

Item 13.     Certain
Relationships and Related Transactions

Information about certain relationships and
transactions with related parties is incorporated by reference
from the discussion in our proxy statement for the 2003 Annual
Meeting of Shareholders.

Item 14.     Controls
and Procedures

(a) Within the 90 days prior to the
date of this report, certain of the Companys management,
under the supervision of the Chief Executive Officer and the
Chief Financial Officer, carried out an evaluation of the
effectiveness of the design and operation of the Companys
disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14(c) and Rule 15d-14(c). Based upon that
evaluation, the Companys Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure
controls and procedures are effective in timely alerting them to
material information relating to the Company required to be
included in the Companys periodic reports to the
Securities and Exchange Commission.

(b) There have been no significant changes
in the Companys internal controls or in other factors that
could significantly affect these controls subsequent to the date
of the evaluation.




PART IV



|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

(a) (1) The Consolidated Financial
Statements of the Company and its subsidiaries are filed as a
separate section of this report commencing on page F-1:



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



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

30



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##### Table of Contents





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



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

(b) Reports on Form 8-K:



| |                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A report on Form 8-K was filed on
    November 6, 2002 relating to confirmation, by the United
    States Bankruptcy Court for the Southern District of New York,
    of the First Amended Joint Plan of Reorganization of Lodgian,
    Inc. and certain of its subsidiaries.
|
| | A report on Form 8-K was filed on
    November 20, 2002 providing a summary of the Plan of
    Reorganization, in accordance with the requirements of the
    Securities and Exchange Commission.                                                                            
|
| | A report on Form 8-K was filed on
    November 26, 2002 relating to a press release, announcing
    the emergence from bankruptcy of Lodgian, Inc. and the majority
    of its subsidiaries.                                                                                 
|
| | A report on Form 8-K was filed on
    January 28, 2003 relating to a press release, announcing
    that Lodgian, Inc.s new common and preferred stocks had
    been approved for listing on the American Stock Exchange.                                                    

31



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##### Table of Contents



SIGNATURES

Pursuant to the requirement of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Company has
duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 31, 2003.



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



| |     |                       
| | --- | ----------------------
| | By: | /s/ DAVID E. HAWTHORNE

| |                                          
| | -----------------------------------------
| |                                          
| | David E. Hawthorne                       
| | President and Chief Executive
    Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Company and in the capacities
indicated, on March 31, 2003.

|                                             |  |                                                          |  | 
|-------------------------------------------- |  | -------------------------------------------------------- |  | 
|                                             |  |                                                         
|Signature                                    |  | Title                                                   
|                                             |  |                                                         
|/s/ DAVID E. HAWTHORNEDavid E. Hawthorne     |  | President and Chief Executive Officer                   
|                                            
|/s/ RICHARD CARTOONRichard Cartoon           |  | Executive Vice President and
    Chief Financial Officer
|                                            
|/s/ MANUEL E. ARTIMEManuel E. Artime         |  | Chief Accounting Officer                                
|                                            
|/s/ RUSSEL S. BERNARDRussel S. Bernard       |  | Chairman of the
    Board of Directors                  
|                                            
|/s/ SEAN F. ARMSTRONGSean F. Armstrong       |  | Director                                                
|                                            
|/s/ STEWART BROWNStewart Brown               |  | Director                                                
|                                            
|/s/ STEPHEN P. GRATHWOHLStephen P. Grathwohl |  | Director                                                
|                                            
|/s/ JONATHAN D. GRAYJonathan D. Gray         |  | Director                                                
|                                            
|/s/ KENNETH A. CAPLANKenneth A. Caplan       |  | Director                                                
|                                            
|/s/ KEVIN C. MCTAVISHKevin C. McTavish       |  | Director                                                
|                                            
|/s/ W. THOMAS PARRINGTONW. Thomas Parrington |  | Director                                                

32



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##### Table of Contents



Sarbanes-Oxley
Section 302(a) Certification

I, David Hawthorne, certify that:

1. I have read this annual report on
Form 10-K of Lodgian, Inc;

2. based on my knowledge, this annual report
does not contain any untrue statement of a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;

3. based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operation and cash flows of the
issuer as of, and for, the periods presented in this annual
report;

4. the registrants other certifying
officers and I:



| |                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) are responsible for establishing and
    maintaining disclosure controls and procedures (as defined by
    Exchange Act Rules 13a-14 and 15d-14) of the registrant                                         
|
| | (b) have designed such disclosure controls
    and procedures to ensure that material information is made known
    to them, particularly during the period in which the annual
    report is being prepared   
|
| | (c) have evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and
|
| | (d) have presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date                           

5. the registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and to the audit
committee of the board of directors:



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. the registrants other certifying
officers and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |     |                       
| | --- | ----------------------
| | By: | /s/ DAVID E. HAWTHORNE

| |                                          
| | -----------------------------------------
| |                                          
| | David E. Hawthorne                       
| | President and Chief Executive
    Officer

Date: March 31, 2003

33



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##### Table of Contents



Sarbanes-Oxley Section 302(a)
Certification

I, Richard Cartoon, certify that:



| |                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have read this annual report on
    Form 10-K of Lodgian, Inc;                                                                                                                                                                                                                                                    
|
| | 2. based on my knowledge, this annual report
    does not contain any untrue statement of a material fact
    necessary in order to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3. based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operation and cash flows of the
    issuer as of, and for, the periods presented in this annual
    report;
|
| | 4. the registrants other certifying
    officers and I:                                                                                                                                                                                                                                                               



| |                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) are responsible for establishing and
    maintaining disclosure controls and procedures (as defined by
    Exchange Act Rules 13a  14 and 15d  14) of the
    registrant                                 
|
| | (b) have designed such disclosure controls
    and procedures to ensure that material information is made known
    to them, particularly during the period in which the annual
    report is being prepared   
|
| | (c) have evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and
|
| | (d) have presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date                           



| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. the registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and to the audit
    committee of the board of directors:



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) the registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |     |                    
| | --- | -------------------
| | By: | /s/ RICHARD CARTOON

| |                             
| | ----------------------------
| |                             
| | Richard Cartoon             
| | Executive Vice President and
| | Chief Financial Officer     

Date: March 31, 2003

34



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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

The following Consolidated Financial Statements
and schedule of the registrant and its subsidiaries are
submitted herewith in response to Item 8:

|                                                                                                                                                                                                                                                       |  |      |     | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                                                                                                                                                                       |  | Page
|                                                                                                                                                                                                                                                       |  |     
|Independent Auditors Report (Deloitte &
    Touche LLP)                                                                                                                                                                                               |  |      | F-2 | 
|Report of Independent Public Accountants (Arthur
    Andersen LLP)                                                                                                                                                                                     |  |      | F-3 | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2001                                                                                                                                                                                       |  |      | F-4 | 
|Consolidated Statements of Operations for the
    Successor period November 23, 2002 to December 31,
    2002, the Predecessor periods January 1, 2002 to
    November 22, 2002 and the years ended December 31,
    2001 and 2000                     |  |      | F-5 | 
|Consolidated Statements of Stockholders
    Equity (Deficit) for the Successor period November 23, 2002
    to December 31, 2002, the Predecessor periods
    January 1, 2002 to November 22, 2002 and the years
    ended December 31, 2001 and 2000 |  |      | F-6 | 
|Consolidated Statements of Cash Flows for the
    Successor period November 23, 2002 to December 31,
    2002, the Predecessor periods January 1, 2002 to
    November 22, 2002 and the years ended December 31,
    2001 and 2000                     |  |      | F-7 | 
|Notes to the Consolidated Financial Statements                                                                                                                                                                                                         |  |      | F-8 | 

All schedules are inapplicable, or the required
information has been disclosed in the Notes to Consolidated
Financial Statements and, therefore, have been omitted.

F-1



---



##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Board of Directors

Lodgian, Inc.


We have audited the accompanying consolidated
balance sheet of Lodgian, Inc. (a Delaware corporation) and
subsidiaries as of December 31, 2002 (Successor Company
balance sheet), and the related statements of operations,
stockholders equity (deficit), and cash flows for the
period November 23, 2002 to December 31, 2002 (Successor
Company operations), and the period January 1, 2002 to
November 22, 2002, (Predecessor Company operations). These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit. The
consolidated financial statements of Lodgian, Inc. as of
December 31, 2001 (Predecessor Company balance sheet), and
for each of the two years in the period ended December 31,
2001 (Predecessor Company operations), were audited by other
auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements in their
report dated March 22, 2002.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated
financial statements, on November 5, 2002, the Bankruptcy
Court entered an order confirming the plan of reorganization
which became effective after the close of business on
November 25, 2002. Accordingly, the accompanying financial
statements have been prepared in conformity with AICPA Statement
of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code, for the
Successor Company as a new entity with assets, liabilities, and
a capital structure having carrying values not comparable with
prior periods as described in Note 2.

In our opinion, the Successor Company
consolidated financial statements present fairly, in all
material respects, the financial position of Lodgian, Inc. and
subsidiaries as of December 31, 2002, and the results of
their operations and their cash flows for the period from
November 23, 2002 to December 31, 2002, in conformity
with accounting principles generally accepted in the United
States of America. Further, in our opinion, the Predecessor
Company financial statements referred to above present fairly,
in all material respects, the Predecessor Companys results
of their operations and their cash flows for the period
January 1, 2002 to November 22, 2002, in conformity
with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP

Atlanta, Georgia

March 21, 2003


F-2



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##### Table of Contents



The following report of Arthur Andersen LLP
(Andersen) is a copy of the report previously issued
by Andersen on March 22, 2002. The report of Andersen is
included in this annual report on Form 10-K pursuant to
Rule 2-02(e) of Regulation S-X. The Company has not
been able to obtain a re-issued report from Andersen. Andersen
has not consented to the inclusion of its report in this annual
report on Form 10-K. Because Andersen has not consented to
the inclusion of its report in this annual report, it may be
difficult to seek remedies against Andersen, and the ability to
seek relief against Andersen may be impaired.

REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

To Lodgian, Inc. and Subsidiaries:

We have audited the accompanying consolidated
balance sheets of Lodgian, Inc. (a Delaware corporation) and
subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations,
stockholders equity (deficit), and cash flows for each of
the two years in the period ended December 31, 2001. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Lodgian, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows
for each of the two years in the period ended December 31,
2001 in conformity with accounting principles generally accepted
in the United States.

The accompanying financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the financial statements, the
Company filed a voluntary petition with the United States
Bankruptcy Court for reorganization under Chapter 11. This
matter raises substantial doubt about the Companys ability
to continue as a going concern. Managements plans in
regard to this matter are described in Note 2. The
financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts
or the amount and classification of liabilities that might
result should the Company be unable to continue as a going
concern.

ARTHUR ANDERSEN LLP

Atlanta, Georgia

March 22, 2002


F-3



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |          |        |         | 
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ----------------- | ----------------- | ------ | ------- | ------- | -------- | ------ | ------- | 
|                                                             |                                                                                                                 | Successor                            |                   | Predecessor      
|                                                             |                                                                                                                 |                                      |                   |                  
|                                                             |                                                                                                                 | December 31, 2002                    |                   | December 31, 2001
|                                                             |                                                                                                                 |                                      |                   |                  
|                                                             |                                                                                                                 |                                     
|                                                             |                                                                                                                 | (In thousands, except share and     
|                                                             |                                                                                                                 | per share data)                     
|ASSETS                                                      
|Current assets:                                              |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             | Cash and cash equivalents                                                                                       |                                      | $                 | 10,875            |        |         | $       | 14,007   |       
|                                                             | Cash, restricted                                                                                                |                                      |                   | 19,384            |        |         |         | 3,218    |       
|                                                             | Accounts receivable ( net of allowances:
    2002  $1,594; 2001  $1,237)                                      |                                      |                   | 10,681            |        |         |         | 12,489   |       
|                                                             | Inventories                                                                                                     |                                      |                   | 7,197             |        |         |         | 7,223    |       
|                                                             | Prepaid expenses and other current assets                                                                       |                                      |                   | 15,118            |        |         |         | 6,284    |       
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             |                                                                                                                 | Total current assets                 |                   |                   | 63,255 |         |         |          | 43,221 |        
|Property and equipment, net                                  |                                                                                                                 |                                      | 664,565           |                   |        |         | 913,968 |         
|Deposits for capital expenditures                            |                                                                                                                 |                                      | 21,309            |                   |        |         | 15,813  |         
|Other assets                                                 |                                                                                                                 |                                      | 13,535            |                   |        |         | 2,360   |         
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             |                                                                                                                 | $                                    | 762,664           |                   |        | $       | 975,362 |         
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)          
|Liabilities not subject to compromise                        |                                                                                                                 |                                      |                   |                   |        |         |         |         
|Current liabilities:                                         |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             | Accounts payable                                                                                                |                                      | $                 | 12,380            |        |         | $       | 2,706    |       
|                                                             | Other accrued liabilities                                                                                       |                                      |                   | 44,125            |        |         |         | 30,977   |       
|                                                             | Advance deposits                                                                                                |                                      |                   | 1,786             |        |         |         | 1,771    |       
|                                                             | Current portion of long-term debt                                                                               |                                      |                   | 14,550            |        |         |         | 7,717    |       
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             |                                                                                                                 | Total current liabilities            |                   |                   | 72,841 |         |         |          | 43,171 |        
|Long-term debt                                               |                                                                                                                 |                                      | 387,424           |                   |        |         | 7,652   |         
|Liabilities subject to compromise                            |                                                                                                                 |                                      | 93,816            |                   |        |         | 925,894 |         
|Minority interests                                           |                                                                                                                 |                                      | 3,616             |                   |        |         | 5,326   |         
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             |                                                                                                                 |                                      | Total liabilities |                   |        | 557,697 |         |          |        | 982,043 | 
|Commitments and contingencies                                |                                                                                                                 |                                      |                   |                   |        |         |         |         
|Mandatorily redeemable 12.25% cumulative
    preferred stock |                                                                                                                 |                                      | 126,510           |                   |        |         |        |         
|Stockholders equity (deficit):                              |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             | Common stock, $.01 par value, 30,000,000 shares
    authorized; 7,000,000 issued and outstanding (Successor)    |                                      |                   | 70                |        |         |         |         |       
|                                                             | Common stock, $.01 par value, 75,000,000 shares
    authorized; 28,479,837 issued and outstanding (Predecessor) |                                      |                   |                  |        |         |         | 284      |       
|                                                             | Additional paid-in capital                                                                                      |                                      |                   | 89,223            |        |         |         | 263,320  |       
|                                                             | Accumulated deficit                                                                                             |                                      |                   | (10,836           | )      |         |         | (268,306 | )     
|                                                             | Accumulated other comprehensive loss                                                                            |                                      |                   |                  |        |         |         | (1,979   | )     
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             |                                                                                                                 | Total stockholders equity (deficit) |                   |                   | 78,457 |         |         |          | (6,681 | )      
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         
|                                                             |                                                                                                                 | $                                    | 762,664           |                   |        | $       | 975,362 |         
|                                                             |                                                                                                                 |                                      |                   |                   |        |         |         |         

Upon emergence from Chapter 11, the Company
adopted fresh start reporting. As a result, all assets and
liabilities were restated to reflect their fair values. The
consolidated financial statements of the new reporting entity
(the Successor) are not comparable to the reporting
entity prior to the Companys emergence from
Chapter 11 (the Predecessor).

See notes to consolidated financial statements.

F-4



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |          |         | 
|------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------ | ------------------ | ------ | ---- | ------- | ------- | ------- |  | ------- | -------- | ------- |  | ------- | -------- | ------- | 
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                   
|                                                        |                                                                                                                                                                                                                                                            | Successor                             |        | Predecessor       
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                   
|                                                        |                                                                                                                                                                                                                                                            | November 23, 2002                     |        | January 1, 2002 to |        |     
|                                                        |                                                                                                                                                                                                                                                            | to December 31, 2002                  |        | November 22, 2002  |        | 2001 |         | 2000   
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |        
|                                                        |                                                                                                                                                                                                                                                            |                                      
|                                                        |                                                                                                                                                                                                                                                            | (In thousands, except per share data)
|Revenues:                                               |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Rooms                                                                                                                                                                                                                                                      |                                       | $      | 21,213             |        |      | $       | 280,447 |         |  | $       | 328,852  |         |  | $       | 422,475  |        
|                                                        | Food and beverage                                                                                                                                                                                                                                          |                                       |        | 9,011              |        |      |         | 81,822  |         |  |         | 98,574   |         |  |         | 131,333  |        
|                                                        | Other                                                                                                                                                                                                                                                      |                                       |        | 1,523              |        |      |         | 15,755  |         |  |         | 20,130   |         |  |         | 27,089   |        
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        |                                                                                                                                                                                                                                                            |                                       | 31,747 |                    |        |      | 378,024 |         |         |  | 447,556 |          |         |  | 580,897 |         
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|Operating expenses:                                     |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Direct:                                                                                                                                                                                                                                                    |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |          |        
|                                                        |                                                                                                                                                                                                                                                            | Rooms                                 |        |                    | 8,068  |      |         |         | 78,338  |  |         |          | 91,415  |  |         |          | 119,159 | 
|                                                        |                                                                                                                                                                                                                                                            | Food and beverage                     |        |                    | 6,856  |      |         |         | 58,929  |  |         |          | 70,665  |  |         |          | 94,950  | 
|                                                        |                                                                                                                                                                                                                                                            | Other                                 |        |                    | 1,160  |      |         |         | 10,631  |  |         |          | 12,202  |  |         |          | 16,829  | 
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        |                                                                                                                                                                                                                                                            |                                       | 16,084 |                    |        |      | 147,898 |         |         |  | 174,282 |          |         |  | 230,938 |         
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        |                                                                                                                                                                                                                                                            | Gross contribution                    |        |                    | 15,663 |      |         |         | 230,126 |  |         |          | 273,274 |  |         |          | 349,959 | 
|                                                        | General, administrative and other                                                                                                                                                                                                                          |                                       |        | 18,453             |        |      |         | 154,219 |         |  |         | 194,835  |         |  |         | 224,734  |        
|                                                        | Depreciation and amortization                                                                                                                                                                                                                              |                                       |        | 3,970              |        |      |         | 53,224  |         |  |         | 62,545   |         |  |         | 64,794   |        
|                                                        | Impairment of long-lived assets                                                                                                                                                                                                                            |                                       |        |                   |        |      |         |        |         |  |         | 67,340   |         |  |         | 60,688   |        
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        |                                                                                                                                                                                                                                                            | Other operating expenses              |        |                    | 22,423 |      |         |         | 207,443 |  |         |          | 324,720 |  |         |          | 350,216 | 
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        |                                                                                                                                                                                                                                                            |                                       | (6,760 | )                  |        |      | 22,683  |         |         |  | (51,446 | )        |         |  | (257    | )       
|Other income (expenses):                                |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Interest income and other                                                                                                                                                                                                                                  |                                       |        | 14                 |        |      |         | 4,940   |         |  |         | 709      |         |  |         | 1,458    |        
|                                                        | Interest expense (contractual interest:
    $3.4 million, $56.9 million and $76.2 million for
    the Successor period ended December 31, 2002, the
    Predecessor period ended November 22, 2002 and the year
    ended December 31, 2001, respectively) |                                       |        | (2,695             | )      |      |         | (29,433 | )       |  |         | (75,326  | )       |  |         | (97,306  | )      
|                                                        | Interest hedge break fee                                                                                                                                                                                                                                   |                                       |        |                   |        |      |         |        |         |  |         |         |         |  |         | (4,294   | )      
|                                                        | Acquisition-termination fees                                                                                                                                                                                                                               |                                       |        |                   |        |      |         |        |         |  |         |         |         |  |         | (3,500   | )      
|                                                        | Gain on asset dispositions                                                                                                                                                                                                                                 |                                       |        |                   |        |      |         |        |         |  |         | 23,975   |         |  |         | 298      |        
|Minority interests:                                     |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Preferred redeemable securities (contractual
    interest: $12.7 million and $13.2 million for the
    Predecessor period ended November 22, 2002 and the year
    ended December 31, 2001)                                                                |                                       |        |                   |        |      |         |        |         |  |         | (12,869  | )       |  |         | (12,412  | )      
|                                                        | Other                                                                                                                                                                                                                                                      |                                       |        | 147                |        |      |         | 126     |         |  |         | 38       |         |  |         | (665     | )      
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Loss before income taxes and reorganization items                                                                                                                                                                                                          |                                       |        | (9,294             | )      |      |         | (1,684  | )       |  |         | (114,919 | )       |  |         | (116,678 | )      
|                                                        | Reorganization items                                                                                                                                                                                                                                       |                                       |        |                   |        |      |         | 12,690  |         |  |         | (25,016  | )       |  |         |         |        
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | (Loss) income before income taxes                                                                                                                                                                                                                          |                                       |        | (9,294             | )      |      |         | 11,006  |         |  |         | (139,935 | )       |  |         | (116,678 | )      
|                                                        | (Provision) benefit for income taxes                                                                                                                                                                                                                       |                                       |        | (32                | )      |      |         | 1,360   |         |  |         | (2,829   | )       |  |         | 28,723   |        
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Net (loss) income                                                                                                                                                                                                                                          |                                       |        | (9,326             | )      |      |         | 12,366  |         |  |         | (142,764 | )       |  |         | (87,955  | )      
|                                                        | Preferred stock dividend                                                                                                                                                                                                                                   |                                       |        | (1,510             | )      |      |         |        |         |  |         |         |         |  |         |         |        
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Net (loss) income attributable to common
    stock                                                                                                                                                                                                         |                                       | $      | (10,836            | )      |      | $       | 12,366  |         |  | $       | (142,764 | )       |  | $       | (87,955  | )      
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|Basic and diluted (loss) earnings per common
    share: |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         
|                                                        | Net (loss) income                                                                                                                                                                                                                                          |                                       | $      | (1.55              | )      |      | $       | 0.43    |         |  | $       | (5.04    | )       |  | $       | (3.12    | )      
|                                                        |                                                                                                                                                                                                                                                            |                                       |        |                    |        |      |         |         |         |  |         |          |         |  |         |         

Upon emergence from Chapter 11, the Company
adopted fresh start reporting. As a result, all assets and
liabilities were restated to reflect their fair values. The
consolidated financial statements of the new reporting entity
(the Successor) are not comparable to the reporting
entity prior to the Companys emergence from
Chapter 11 (the Predecessor).

See notes to consolidated financial statements.

F-5



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)

For the period ended November 22, 2002,
the period ended December 31, 2002


and the years ended December 31, 2001 and
2000


|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|----------------------------------------------- |  | --------------------------------- | ----------- | ---------- |  | ----------- | ---- | ------------- |  | ----------------- | -------- | ------ |  | - | -------- | - |  | - | ------ | - |  | - | -------- | -
|                                                |  |                                   |             |            |  |             |      | Accumulated   |  |                  
|                                                |  | Common Stock                      |             | Additional |  |             |      | Other         |  | Total            
|                                                |  |                                   |             | Paid-in    |  | Accumulated |      | Comprehensive |  | Stockholders    
|                                                |  | Shares                            |             | Amount     |  | Capital     |      | Deficit       |  | Loss (net of tax) |          | Equity
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |       
|                                                |  |                                  
|                                                |  | (In thousands, except share data)
|Predecessor Company:                            |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Balance at January 1, 2000                      |  |                                   | 28,130,325  |            |  | $           | 281  |               |  | $                 | 262,760  |        |  | $ | (37,587  | ) |  | $ | (912   | ) |  | $ | 224,542  |  
|401(k) Plan contribution                        |  |                                   | 144,131     |            |  |             | 1    |               |  |                   | 504      |        |  |   |         |   |  |   |       |   |  |   | 505      |  
|Director compensation                           |  |                                   | 15,968      |            |  |             |      |               |  |                   | 56       |        |  |   |         |   |  |   |       |   |  |   | 56       |  
|Net loss                                        |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   | (87,955  | ) |  |   |       |   |  |   | (87,955  | )
|Currency translation adjustments                |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   |         |   |  |   | (268   | ) |  |   | (268     | )
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Comprehensive loss                              |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   |         |   |  |   |       |   |  |   | (88,223  | )
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Balance at December 31, 2000                    |  |                                   | 28,290,424  |            |  |             | 282  |               |  |                   | 263,320  |        |  |   | (125,542 | ) |  |   | (1,180 | ) |  |   | 136,880  |  
|401(k) Plan contribution                        |  |                                   | 189,413     |            |  |             | 2    |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   | 2        |  
|Net loss                                        |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   | (142,764 | ) |  |   |       |   |  |   | (142,764 | )
|Currency translation adjustments, net of tax    |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   |         |   |  |   | (799   | ) |  |   | (799     | )
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Comprehensive loss                              |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   | (143,563 | )
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Balance at December 31, 2001                    |  |                                   | 28,479,837  |            |  |             | 284  |               |  |                   | 263,320  |        |  |   | (268,306 | ) |  |   | (1,979 | ) |  |   | (6,681   | )
|Net income through November 22, 2002            |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   | 12,366   |   |  |   |       |   |  |   | 12,366   |  
|Currency translation adjustments, net of tax    |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   |          |   |  |   | 101    |   |  |   | 101      |  
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Comprehensive loss                              |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   |          |   |  |   |        |   |  |   | 12,467   |  
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Balance at November 22, 2002                    |  |                                   | 28,479,837  |            |  |             | 284  |               |  |                   | 263,320  |        |  |   | (255,940 | ) |  |   | (1,878 | ) |  |   | 5,786    |  
|Reorganization adjustments                      |  |                                   | (28,479,837 | )          |  |             | (284 | )             |  |                   | (263,320 | )      |  |   | 255,940  |   |  |   | 1,878  |   |  |   | (5,786   | )
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Balance November 22, 2002                       |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   |         |   |  |   |       |   |  |   |         |  
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Successor Company:                              |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Distribution of new common shares               |  |                                   | 7,000,000   |            |  |             | 70   |               |  |                   | 81,186   |        |  |   |         |   |  |   |       |   |  |   | 81,256   |  
|Distribution of A warrants, 1,510,638           |  |                                   |            |            |  |             |     |               |  |                   | 4,774    |        |  |   |          |   |  |   |        |   |  |   | 4,774    |  
|Distribution of B warrants, 1,029,366           |  |                                   |            |            |  |             |     |               |  |                   | 3,263    |        |  |   |          |   |  |   |        |   |  |   | 3,263    |  
|Net loss  November 22 to
    December 31, 2002 |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   | (9,326   | ) |  |   |        |   |  |   | (9,326   | )
|Currency translation adjustments, net of tax    |  |                                   |            |            |  |             |     |               |  |                   |         |        |  |   |         |   |  |   |       |   |  |   |         |  
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Comprehensive loss                              |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   | (9,326   | )
|Preferred dividends accrued (not declared)      |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   | (1,510   | ) |  |   |        |   |  |   | (1,510   | )
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  
|Balance December 31, 2002                       |  |                                   | 7,000,000   |            |  | $           | 70   |               |  | $                 | 89,223   |        |  | $ | (10,836  | ) |  | $ |       |   |  | $ | 78,457   |  
|                                                |  |                                   |             |            |  |             |      |               |  |                   |          |        |  |   |          |   |  |   |        |   |  |   |          |  

Upon emergence from Chapter 11, the Company
adopted fresh start reporting. As a result, all assets and
liabilities were restated to reflect their fair values. The
consolidated financial statements of the new reporting entity
(the Successor) are not comparable to the reporting
entity prior to the Companys emergence from
Chapter 11 (the Predecessor).

See notes to consolidated financial statements.

F-6



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |          |         |        |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------- | -------------------------------------------------- | ------------------ | ----- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | ------- | ------ | -------- | -------- | ------- | ------ | -
|                                                                                |                                                                                                        |                                                            |                                                    |                   
|                                                                                |                                                                                                        | Successor                                                  |                                                    | Predecessor       
|                                                                                |                                                                                                        |                                                            |                                                    |                   
|                                                                                |                                                                                                        | November 23, 2002                                          |                                                    | January 1, 2002 to |       |        
|                                                                                |                                                                                                        | to December 31, 2002                                       |                                                    | November 22, 2002  |       | 2001    |         | 2000    
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |         
|                                                                                |                                                                                                        |                                                           
|                                                                                |                                                                                                        | (In thousands)                                            
|Operating activities:                                                           |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Net (loss) income                                                                                      |                                                            | $                                                  | (9,326             | )     |         | $       | 12,366   |          |         | $       | (142,764 | )       |        | $        | (87,955  | )      
|                                                                                | Adjustments to reconcile net (loss) income
    to net cash (used in) provided by operating activities: |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |          |        
|                                                                                |                                                                                                        | Depreciation and amortization                              |                                                    |                    | 3,970 |         |         |          | 53,224   |         |         |          | 62,545  |        |          |          | 64,794  |       
|                                                                                |                                                                                                        | Impairment of long-lived assets                            |                                                    |                    |      |         |         |          | 222,071  |         |         |          | 67,340  |        |          |          | 60,688  |       
|                                                                                |                                                                                                        | Gain on extinguishment of debt                             |                                                    |                    |      |         |         |          | (260,838 | )       |         |          |        |        |          |          |        |       
|                                                                                |                                                                                                        | Fresh start adjustments  other                            |                                                    |                    |      |         |         |          | (3,938   | )       |         |          |        |        |          |          |        |       
|                                                                                |                                                                                                        | Deferred income tax benefit                                |                                                    |                    |      |         |         |          |         |         |         |          |        |        |          |          | (30,063 | )     
|                                                                                |                                                                                                        | Minority interests                                         |                                                    |                    | (147  | )       |         |          | (126     | )       |         |          | 12,831  |        |          |          | 10,014  |       
|                                                                                |                                                                                                        | Gain on sale of assets                                     |                                                    |                    |      |         |         |          |         |         |         |          | (23,975 | )      |          |          | (298    | )     
|                                                                                |                                                                                                        | Write-off and amortization of deferred financing
    costs |                                                    |                    | 167   |         |         |          | 56       |         |         |          | 26,273  |        |          |          | 5,654   |       
|                                                                                |                                                                                                        | Other                                                      |                                                    |                    | (381  | )       |         |          | 213      |         |         |          | 563     |        |          |          | (3,043  | )     
|                                                                                |                                                                                                        | Changes in operating assets and liabilities:               |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |          |         |       
|                                                                                |                                                                                                        |                                                            | Accounts receivable, net of allowances             |                    |       | 3,821   |         |          |          | (2,013  | )       |          |         | 8,135  |          |          |         | 5,896  |  
|                                                                                |                                                                                                        |                                                            | Inventories                                        |                    |       | 126     |         |          |          | (100    | )       |          |         | 582    |          |          |         | 1,385  |  
|                                                                                |                                                                                                        |                                                            | Prepaid expenses, other assets and restricted cash |                    |       | 14,795  |         |          |          | (39,795 | )       |          |         | (1,607 | )        |          |         | 1,013  |  
|                                                                                |                                                                                                        |                                                            | Accounts payable                                   |                    |       | (1,797  | )       |          |          | 1,604   |         |          |         | 2,277  |          |          |         | (3,499 | )
|                                                                                |                                                                                                        |                                                            | Other accrued liabilities                          |                    |       | (11,025 | )       |          |          | 15,611  |         |          |         | (2,818 | )        |          |         | (1,704 | )
|                                                                                |                                                                                                        |                                                            | Advance deposits                                   |                    |       | (303    | )       |          |          | 318     |         |          |         | (83    | )        |          |         | (530   | )
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Net cash (used in) provided by operating
    activities                         |                                                                                                        |                                                            | (100                                               | )                  |       |         | (1,347  | )        |          |         | 9,299   |          |         |        | 22,352   |         
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Investing activities:                                                           |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Capital improvements                                                                                   |                                                            |                                                    | (4,808             | )     |         |         | (23,290  | )        |         |         | (28,844  | )       |        |          | (78,716  | )      
|                                                                                | Proceeds from sale of assets, net of related
    selling costs                                         |                                                            |                                                    |                   |       |         |         |         |          |         |         | 67,910   |         |        |          | 205,523  |        
|                                                                                | (Deposits) withdrawals for capital expenditures                                                        |                                                            |                                                    | (7,656             | )     |         |         | 2,160    |          |         |         | (1,808   | )       |        |          | (2,184   | )      
|                                                                                | Other                                                                                                  |                                                            |                                                    | (1,010             | )     |         |         | (758     | )        |         |         |         |         |        |          |         |        
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Net cash (used in) provided by investing
    activities                         |                                                                                                        |                                                            | (13,474                                            | )                  |       |         | (21,888 | )        |          |         | 37,258  |          |         |        | 124,623  |         
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Financing activities:                                                           |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Proceeds from borrowings on working capital
    revolver                                               |                                                            |                                                    |                   |       |         |         |         |          |         |         | 21,000   |         |        |          | 30,000   |        
|                                                                                | Proceeds from issuance of long-term obligations                                                        |                                                            |                                                    |                   |       |         |         | 309,098  |          |         |         |         |         |        |          | 2,326    |        
|                                                                                | Principal payments on long-term obligations                                                            |                                                            |                                                    | (1,221             | )     |         |         | (266,601 | )        |         |         | (58,954  | )       |        |          | (163,868 | )      
|                                                                                | Principal payments on working capital revolver                                                         |                                                            |                                                    |                   |       |         |         |         |          |         |         | (15,000  | )       |        |          | (5,000   | )      
|                                                                                | Payments of deferred loan costs                                                                        |                                                            |                                                    |                   |       |         |         | (7,599   | )        |         |         | (598     | )       |        |          | (3,300   | )      
|                                                                                | Distributions to minority interests                                                                    |                                                            |                                                    |                   |       |         |         |         |          |         |         |         |         |        |          | (775     | )      
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Net cash (used in) provided by financing
    activities                         |                                                                                                        |                                                            | (1,221                                             | )                  |       |         | 34,898  |          |          |         | (53,552 | )        |         |        | (140,617 | )       
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Net (decrease) increase  in cash and cash
    equivalents                       |                                                                                                        |                                                            | (14,795                                            | )                  |       |         | 11,663  |          |          |         | (6,995  | )        |         |        | 6,358    |         
|Cash and cash equivalents at beginning of period                                |                                                                                                        |                                                            | 25,670                                             |                    |       |         | 14,007  |          |          |         | 21,002  |          |         |        | 14,644   |         
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Cash and cash equivalents at end of period                                      |                                                                                                        | $                                                          | 10,875                                             |                    |       | $       | 25,670  |          |          | $       | 14,007  |          |         | $      | 21,002   |         
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Supplemental cash flow information:                                             |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Cash paid (received) during the period for:                                     |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Interest, net of amount capitalized                                                                    |                                                            | $                                                  | 1,589              |       |         |         | 31,132   |          |         | $       | 73,131   |         |        | $        | 88,247   |        
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Income taxes, net of refunds                                                                           |                                                            | $                                                  | (302               | )     |         |         | (302     | )        |         | $       | 120      |         |        | $        | 584      |        
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Supplemental disclosure of non-cash investing and
    financing activities:     |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Issuance of preferred stock on emergence from
    Chapter 11                                           |                                                            | $                                                  |                   |       |         | $       | 125,000  |          |         | $       |         |         |        | $        |         |        
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Issuance of other securities on emergence from
    Chapter 11                                          |                                                            | $                                                  |                   |       |         | $       | 89,293   |          |         | $       |         |         |        | $        |         |        
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Net non-cash debt increase                                                                             |                                                            | $                                                  | 16                 |       |         | $       | 137      |          |         | $       |         |         |        | $        | 1,656    |        
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|Operating cash receipts and payments resulting
    from Chapter 11 proceedings: |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                | Professional fees paid                                                                                 |                                                            |                                                    |                   |       |         |         | (11,184  | )        |         |         | (3,772   | )       |        |          |         |        
|                                                                                | Other reorganization payments                                                                          |                                                            |                                                    |                   |       |         |         | (908     | )        |         |         | (24      | )       |        |          |         |        
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         
|                                                                                |                                                                                                        | $                                                          |                                                   |                    |       | $       | (12,092 | )        |          | $       | (3,796  | )        |         | $      |         |         
|                                                                                |                                                                                                        |                                                            |                                                    |                    |       |         |         |          |          |         |         |          |         |        |          |         

Upon emergence from Chapter 11, the Company
adopted fresh start reporting. As a result, all assets and
liabilities were restated to reflect their fair values. The
consolidated financial statements of the new reporting entity
(the Successor) are not comparable to the reporting
entity prior to the Companys emergence from
Chapter 11 (the Predecessor).

See notes to consolidated financial statements.

F-7



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS

December 31, 2002


1.     Summary of
Significant Accounting Policies



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

On December 11, 1998, Servico, Inc.
(Servico) merged with Impac Hotel Group, LLC (Impac), pursuant
to which Servico and Impac formed a new company Lodgian, Inc.
(Lodgian or the Company). This
transaction (the Merger) was accounted for under the
purchase method of accounting, whereby Servico was considered
the acquiring company.

As of December 31, 2002 and 2001, Lodgian,
its wholly owned subsidiaries and consolidated joint ventures
(collectively, the Company), owned or managed
106 hotels in 32 states and Canada. At
December 31, 2000, the Company owned or managed
112 hotels.



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

The financial statements consolidate the accounts
of Lodgian, its wholly-owned subsidiaries and four joint
ventures in which Lodgian exercises control. Lodgian believes it
has control of the joint ventures when the Company manages and
has control of the joint ventures assets and operations,
has the ability and authority to enter into financing agreements
on behalf of the entity or to sell the assets of the entity
within reasonable business guidelines. An unconsolidated entity,
Columbus Hospitality Associates LP, in which the Company has a
30% equity interest, is accounted for under the equity method of
accounting. All significant intercompany accounts and
transactions have been eliminated in consolidation.



| |                      
| | ---------------------
| | Fresh Start Reporting

As more fully disclosed in Note 2, on
December 20, 2001, the Company and substantially all of its
subsidiaries that owned hotel properties filed for voluntary
reorganization under Chapter 11 of the Bankruptcy Code.

Effective November 22, 2002, the Company
adopted fresh start reporting. As a result, all assets and
liabilities were restated to reflect their fair values. The
Consolidated Financial Statements after emergence are those of a
new reporting entity (the Successor) and are not
comparable to the financial statements prior to confirmation
(the Predecessor). See Note 2.

The shares to be issued to the general unsecured
creditors are considered issued and outstanding for accounting
purposes. As claims of creditors are resolved, the Company will
make periodic distributions of preferred and common stock to
these creditors.



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

Inventories consist primarily of food and
beverage, linens, china, tableware and glassware and are valued
at the lower of cost (computed on the first-in, first-out
method) or market.



| |                                                             
| | ------------------------------------------------------------
| | Minority
    Interests  Preferred Redeemable
    Securities

Minority interests-preferred redeemable
securities, represents Convertible Redeemable Equity Structure
Trust Securities (CRESTS). The CRESTS bore interest
at 7% and were convertible into shares of the Companys
common stock. For further discussion of the CRESTS, see
Note 8. In connection with the Companys emergence
from Chapter 11, the CRESTS were exchanged for common stock
(868,000 shares), Class A warrants (1,258,815) and
Class B warrants (251,062).

F-8



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                               
| | ------------------------------
| | Minority
    Interests  Other

Minority interests represent the minority
interests proportionate share of equity of joint ventures
that are accounted for by the Company on a consolidated basis.
The Company generally allocates to minority interests their
share of any profits or losses in accordance with the provisions
of the applicable agreements. However, if the loss applicable to
a minority interest exceeds its total investment and advances,
such excess is charged to the Company.



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

Effective November 22, 2002, the Company
restated the recorded value of all property and equipment to
reflect their fair value. Previously, property and equipment had
been stated at depreciated cost, less adjustment for impairment
where applicable. Capital improvements are capitalized when they
extend the useful life of the related asset. All repair and
maintenance items are expensed as incurred. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets.

The Company capitalizes interest costs incurred
during the renovation and construction of capital assets. During
the Successor period ended December 31, 2002, the
Predecessor periods ended November 22, 2002 and the years
ended December 31, 2001 and 2000, the Company capitalized
$149,000, $365,000, $861,000 and $747,000 of interest,
respectively.

Management periodically evaluates the
Companys property and equipment to determine whether
events or changes in circumstances indicate that a possible
impairment in the carrying value of the assets has occurred. The
carrying value of long-lived assets is considered impaired when
its undiscounted cash flows estimated to be generated by those
assets are less than the assets carrying amount. If it is
determined that an impairment has occurred, the excess of the
assets carrying value over its estimated fair value will
be charged to operations. Impairment losses for assets held for
sale are recognized when the assets carrying values are
greater than the fair value less estimated selling costs. See
Note 6 for further discussion of the Companys charges for
asset impairment.



| |               
| | --------------
| | Deferred Costs

Deferred franchise costs of $4,281,000 and
$2,360,000 at December 31, 2002 and 2001, respectively, are
included in other assets, net of accumulated amortization.
During 2001, deferred financing costs were all written off as
reorganization items since the related debt was subject to
compromise in accordance with the Companys bankruptcy
petition. Deferred financing costs, net of accumulated
amortization, at December 31, 2002, were $7,431,000.
Deferred franchise and other costs are amortized using the
straight-line method over the terms of the related franchise or
other agreements, while deferred financing costs are amortized
using the interest method over the related term of the debt.



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

The Company considers all highly liquid
investments with an original maturity of three months or less
when purchased to be cash equivalents. Restricted cash consists
of funds deposited as letters of credit collateral, and amounts
reserved for capital improvements, debt service, taxes and
insurance, as required by loan agreements.



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

The fair values of current assets and current
liabilities are assumed equal to their reported carrying
amounts. The fair values of the Companys long-term debt
are estimated using discounted cash flow analyses, based on the
Companys current incremental borrowing rates for similar
types of borrowing arrangements. The fair values of the
Companys debt obligations have been estimated using
borrowing rates currently available to

F-9



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the Company for similar terms and was
approximately $501,828,000 at December 31, 2002 compared to a
carrying amount of approximately $493,395,000.



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

Concentration of credit risk associated with cash
and cash equivalents is considered low due to the credit quality
of the issuers of the financial instruments held by the Company
and due to their short duration to maturity. Accounts receivable
are primarily from major credit card companies, airlines and
other travel related companies. The Company performs ongoing
evaluations of its significant customers and generally does not
require collateral. The Company maintains an allowance for
doubtful accounts at a level which management believes is
sufficient to cover potential credit losses. At
December 31, 2002 and 2001, allowances were $1,594,000 and
$1,237,000, respectively.



| |             
| | ------------
| | Income taxes

The Company accounts for income taxes under
Statement of Financial Accounting Standards
(SFAS) 109, Accounting for Income
Taxes, which requires the use of the liability method of
accounting for deferred income taxes. See Note 11 for the
components of the Companys deferred taxes. As a result of
the Companys history of losses, the Company has provided a
full valuation allowance against its deferred tax asset as it is
more likely than not that the deferred tax asset will not be
realized.



| |                                                    
| | ---------------------------------------------------
| | Earnings Per Common and Common Equivalent
    Share

Basic earnings per share is calculated based on
the weighted average number of common shares outstanding during
the periods and include common stock (if any) contributed by the
Company to its employees 401(k) Plan. Dilutive earnings per
common share include the Companys outstanding stock
options and shares convertible under the Companys CRESTS
and warrants (A and B) , if dilutive. See Note 13 for
computation of basic and diluted earnings per share.

As more fully discussed in Note 2, upon the
Companys emergence from reorganization proceedings, the
Companys previous equity securities were cancelled and new
equity securities were issued to certain interest holders.
Because the Company is assumed to be a new entity for financial
reporting purposes subsequent to the application of fresh start
reporting, prior periods have not been restated.



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

Prior to its filing for Chapter 11, on
December 20, 2001, the Company granted stock options for a
fixed number of shares to employees with an exercise price equal
to the fair value of the shares at the date of grant. The
Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion (APB)
No. 25, Accounting for Stock Issued to
Employees and related interpretations. Under APB
No. 25, if the exercise price of the Companys
employee stock options is equal to the market price of the
underlying stock on the date of grant, no compensation expense
is recognized. Under SFAS No. 123, Accounting for
Stock-Based Compensation, compensation cost is measured at
the grant date based on the estimated value of the award and is
recognized over the service (or vesting) period. As discussed
below, under New Accounting Pronouncements, the
Company adopted SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and
Dilution on November 22, 2002.

F-10



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Had compensation cost of the Companys Stock
Option Plan been recognized under SFAS No. 123, based on
the fair market value at grant dates, the Companys pro
forma net loss and net loss per share would have been reflected
as follows:

|                       |             |      |  |        |  |      |  |          |   |  |  |         |  
|---------------------- | ----------- | ---- |  | ------ |  | ---- |  | -------- | - |  |  | ------- | -
|                       |             | 2002 |  | 2001   |  | 2000
|                       |             |      |  |        |  |     
|Net income (loss):     |             |      |  |        |  |      |  |          |   |  |  |        
|                       | As reported |      |  | 12,366 |  |      |  | (142,764 | ) |  |  | (87,955 | )
|                       | Pro forma   |      |  | 10,972 |  |      |  | (144,745 | ) |  |  | (91,048 | )
|Loss per common share: |             |      |  |        |  |      |  |          |   |  |  |        
|                       | As reported |      |  | 0.43   |  |      |  | (5.04    | ) |  |  | (3.12   | )
|                       | Pro forma   |      |  | 0.39   |  |      |  | (5.11    | ) |  |  | (3.23   | )

As previously indicated, the Company emerged from
Chapter 11 on November 25, 2002 and applied fresh
start reporting effective November 22, 2002. All of its
previous common shares were cancelled, thereby also canceling
options to purchase these shares.



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

Revenues are recognized when the services are
rendered. Revenues are comprised of room, food and beverage and
other revenues. Room revenues are derived from guest room
rentals, whereas food and beverage revenues primarily include
sales from hotel restaurants, room service and hotel catering.
Other revenues include charges for guests long-distance
telephone service, laundry service and parking.



| |                    
| | -------------------
| | Advertising Expense

The cost of advertising is expensed as incurred.
The Company incurred $220,000, $2,031,000, $2,684,000 and
$3,492,000 in advertising costs for the Successor period ended
December 31, 2002 and the Predecessor periods ended
November 22, 2002 and the years ended December 31,
2001 and 2000, respectively.



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

The financial statements of foreign subsidiaries
have been translated into U.S. dollars in accordance with SFAS
No. 52, Foreign Currency Translation. All
balance sheet accounts have been translated using the exchange
rates in effect at the balance sheet dates. Income statement
amounts have been translated using the average rate for the
year. The gains and losses resulting from the changes in
exchange rates from year to year are reported in other
comprehensive income. The effects on the statements of
operations of transaction gains and losses are insignificant for
all years presented.



| |                    
| | -------------------
| | Reportable Segments

The Companys reportable segment is the
ownership and management of hotels.



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

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

F-11



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

In June 2001, SFAS No. 142, Goodwill
and other Intangible Assets (effective for fiscal years
beginning after December 15, 2001) was issued. SFAS
No. 142 specifies that goodwill and intangible assets with
indefinite lives will no longer be amortized but instead will be
subject to periodic impairment testing. SFAS No. 142 was
adopted by the Company in the first quarter of 2002. The
adoption had no impact on the Companys financial
statements.

In August 2001, SFAS No. 143,
Accounting for Asset Retirement Obligations,
(effective for fiscal periods commencing after June 15,
2002) was issued. SFAS No. 143 requires that entities
recognize the fair value of a liability for an asset retirement
obligation in the period in which it is incurred if a reasonable
estimate of fair value can be made. We believe that the adoption
of SFAS No. 143 did not have a significant impact on the
financial statements.

In August 2001, SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived
Assets, (effective for fiscal periods commencing
December 15, 2001) was issued. SFAS No. 144 addresses
financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of.
The statement supersedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, and among other factors, establishes
criteria beyond that previously specified in SFAS No. 121
to determine when a long-lived asset is to be considered held
for sale. SFAS No. 144 requires the operating results of
real estate assets sold to be included in discontinued
operations in the statements of operations. The adoption had no
impact on these financial statements, but due to dispositions
subsequent to December 31, 2002, the adoption will impact
the financial statements for the year ended December 31,
2003.

In April 2002, SFAS No. 145 Rescission
of SFAS No. 4, 44, 64 and Amendment of SFAS No. 13 and
Technical Corrections was issued. SFAS No. 145
prevents treatment as extraordinary, gains or losses on
extinguishment of debt not meeting the criteria of APB 30. SFAS
145 is effective for fiscal years beginning after May 15,
2002. The Company was required to adopt SFAS No. 145 on
November 22, 2002 upon its emergence from Chapter 11.
As a result, the gain on extinguishment of debt of
$256.4 million associated with the Companys emergence
from Chapter 11 was recorded in the period January 1,
2002 to November 22, 2002 (Predecessor) within
reorganization items. Additionally, a $4.4 million gain on
extinguishment of debt relating to Macon Hotel Associates was
recorded in interest income and other.

In June 2002, SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities, was
issued. SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities
and nullifies Emerging Issue Task Force (EITF) Issue
No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including certain costs incurred in a restructuring).
SFAS No. 146 requires recognition of a liability for a cost
associated with an exit or disposal activity when the liability
is incurred as opposed to when the entity commits to an exit
plan under EITF Issue No. 94-3. The Company will be
required to adopt SFAS No. 146 for exit or disposal
activities initiated after November 22, 2002 upon the
emergence from Chapter 11. The Company has determined that
there is no current impact of adopting SFAS No. 146.
However, SFAS No. 146 will impact the accounting for future
restructuring activities.

In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others
(FIN 45) which elaborates on the disclosures to
be made by a guarantor in its financial statements. It also
requires a guarantor to recognize a liability for the fair value
of the obligation undertaken in issuing the guarantee at the
inception of a guarantee. The disclosure requirements of
FIN 45 are effective for the Company as of
December 31, 2002. The recognition provisions of
FIN 45 will be applied on a prospective

F-12



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

basis to guarantees issued after
December 31, 2002. The Company does not expect the
requirements of FIN 45 to have a material impact on its
financial position and results of operations.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure.
SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods
of transition for an entity that voluntarily changes to the
fair-value-based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of SFAS
No. 123 to require prominent disclosure about the effects
on reported net income and earnings per share and the
entitys accounting policy decisions with respect to
stock-based employee compensation. Certain of the disclosure
requirements are required for all companies, regardless of
whether the fair value method or intrinsic value method is used
to account for stock-based employee compensation arrangements.
The Company continues to account for its employee incentive
stock option plans using the intrinsic value method in
accordance with the recognition and measurement principles of
APB Opinion No. 25, Accounting for Stock Issued to
Employees. The amendments to SFAS No. 123 will be
effective for financial statements for fiscal years ended after
December 15, 2002 and for interim periods beginning after
December 15, 2002. The Company was required to adopt SFAS
No. 148 on November 22, 2002 upon its emergence from
Chapter 11.

2.     Bankruptcy
Proceedings and Fresh Start Reporting

On December 20, 2001, the Company and
substantially all of its subsidiaries which owned hotel
properties filed for voluntary reorganization under
Chapter 11 of the Bankruptcy Code.

Less than one year later, at a Confirmation
Hearing held on November 5, 2002, the Bankruptcy Court
confirmed the Companys First Amended Joint Plan of
Reorganization (the Joint Plan of Reorganization)
and, on November 25, 2002, the Company and entities owning
78 hotels officially emerged from Chapter 11. Pursuant
to the terms of the Joint Plan of Reorganization, eight other
wholly-owned hotels were returned to lenders in January 2003 in
satisfaction of outstanding debt obligations and one hotel was
returned to the lessor of a capital lease.

Of the Companys 97 hotel portfolio,
18 hotels are owned by two subsidiaries (the Impac
Debtors) which were not part of the Joint Plan of
Reorganization and remain in Chapter 11 (the Impac
Hotels). The Impac Hotels represent approximately 19% of
the Companys total hotel properties as of March 21,
2003. The Impac Hotels contributed approximately 11.7% of the
Companys 2002 combined Predecessor and Successor revenues.
All of the Impac Hotels received financing prior to the
bankruptcy filing from one lender which has a claim of
$109.0 million against the Impac Debtors secured by the
Impac Hotels. The Company and the Impac Debtors have reached an
agreement with such lender which provides for a release of the
hotel collateral in exchange for the payment by the Impac
Debtors of an agreed amount (the Impac Settlement
Amount) by a date no later than May 31, 2003. If the
agreed amount is not paid by May 31, 2003, the Impac Hotels
will be returned to the lender in satisfaction of outstanding
mortgage obligations. On March 3, 2003, the Impac Debtors
filed a separate plan of reorganization (the Impac Plan of
Reorganization) pursuant to the terms of which the Company
and the Impac Debtors, through 18 newly-formed
subsidiaries, would obtain financing from Lehman Brothers
Holdings Inc. (the Lehman Financing), which would be
used to pay the Impac Settlement Amount. Although there can be
no assurance, the Company is hopeful that the Impac Plan of
Reorganization will be approved and the Lehman Financing
successfully completed and, accordingly, that the Company will
be able to retain the Impac Hotels.

Pursuant to the Joint Plan, the following
significant events took effect upon the Companys emergence
from reorganization proceedings:



| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |  | preferred shares totaling 5,000,000 (par value
    $0.01; initial liquidation value $25 per share) became available
    for issuance;

F-13



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | new common shares totaling 7,000,000 (par value
    $0.01) became available for issuance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Class A warrants to purchase 1,510,638
    shares of common stock at $18.29 per share, became available for
    issuance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Class B warrants to purchase 1,029,366
    shares of common stock at $25.44 per share, became available for
    issuance;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | the previous equity shares (28,479,837 in total)
    were cancelled and the previous stockholders received their pro
    rata share of 207,900 shares of common stock along with warrants
    to purchase 251,823 shares of common stock at $18.29 per share
    (Class A warrants) and warrants to purchase 778,304 shares
    of common stock at an exercise price of $25.44 per share
    (Class B warrants);                                                                                                                                                                                                                                                                                                       
|
| |  | the 12.25% Convertible Redeemable Equity
    Structured Trust Securities (CRESTS) were cancelled
    and the holders of the CRESTS received their pro rata share of
    868,000 shares of the common stock along with warrants to
    purchase 1,258,815 shares of common stock at $18.29 per share
    (Class A warrants) and warrants to purchase 251,062 shares
    of common stock at an exercise price of $25.44 per share
    (Class B warrants);                                                                                                                                                                                                                                                              
|
| |  | the Senior Subordinated Notes (the
    Notes) were cancelled and the holders of the Notes
    received their pro rata share of 4,690,600 shares of preferred
    stock and 5,557,511 shares of common stock;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | the holders of allowed general unsecured claims
    became entitled to 309,400 shares of preferred stock and 366,589
    shares of common stock;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | the Company closed on its $309.0 million
    exit financing arrangements with and through Merrill Lynch
    Mortgage Lending, Inc. (used to repay previous debt obligations,
    to fund payments of certain allowed claims and to fund portions
    of certain required cash escrows); this financing is secured by
    57 of the Companys hotels.                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | loans from lenders approximating
    $86.0 million, secured by 21 of the Companys hotels,
    were reinstated on their previous terms, except for the
    extension of certain maturities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | in accordance with AICPA, Statement of Position
    (SOP) 90-7, Financial Reporting by Entities in
    Reorganization Under the Bankruptcy Code, the Company
    implemented fresh start reporting effective November 22,
    2002 (the date on which the exit financing agreement was
    signed). As a result, assets and liabilities have been recorded
    based on fair values. The Consolidated Financial Statements
    subsequent to the Companys emergence from Chapter 11
    are those of a new reporting entity (the Successor)
    and are not comparable with the financial statements of the
    Company prior to the effective date of the Joint Plan of
    Reorganization (the Predecessor).

The shares to be issued to the general unsecured
creditors approximate 309,400 shares of preferred stock and
366,589 shares of common stock. These shares represent part of
the Disputed Claims Reserve held by the Companys transfer
agent and will be distributed as claims are resolved. These
shares are considered issued and outstanding for accounting
purposes. As claims of creditors are resolved, the Company will
make periodic distributions of preferred and common stock to
these creditors.

The effects of the reorganization plan were
recorded in accordance with the American Institute of Certified
Public Accountants Statement of Position (SOP)
90-7, Financial Reporting by Entities in Reorganization
under the Bankruptcy Code. Fresh start reporting was
applicable because the previous stockholders received less than
50% of the new voting shares and the reorganization value of the
Predecessor Company was less than the sum of the pre-petition
liabilities allowed and post-petition liabilities.

Fresh start reporting principles require that the
reorganization value be allocated to the entitys assets
and that liabilities be stated at the fair value of amounts to
be paid.

F-14



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The reorganization value in respect of the
entities included in the Joint Plan of Reorganization was
determined by the Company, the Official Committee of Unsecured
Creditors and their respective financial advisers. The
reorganization value reflects the midpoint of a range of values
arrived at by applying various valuation techniques including,
among others:



| |                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) A comparable company analysis, involving
    the analysis of enterprise values of public companies deemed
    generally comparable to the operating business of the Company
    and applying the earnings before interest, taxes, depreciation
    and amortization (EBITDA) provided by this analysis
    to the applicable Lodgian entities.
|
| | b) A discounted cash flow analysis utilizing
    a weighted average cost of capital to compute the present value
    of free cash flows and terminal value of the applicable Lodgian
    entities.                                                                                                                                                 
|
| | c) A comparable transaction analysis
    involving the analysis of the financial terms of certain
    acquisitions of companies and sales of assets which were deemed
    to be comparable to the operating businesses of the Company and
    then applying these EBITDA multiples to the applicable Lodgian
    entities.                         

The projections utilized in the determination of
reorganization value were based on a variety of estimates and
assumptions. These estimates and assumptions are subject to
uncertainties and contingencies and may not be realized. The
projections should therefore not be seen as guarantees of actual
results.

In accordance with SOP 90-7, the effects or
adjustments on reported amounts of individual assets and
liabilities resulting from the adoption of fresh start reporting
and the effects of the forgiveness of debt are reflected in the
Predecessors Statement of Operations. All fresh start
adjustments, are included in reorganization items.

F-15



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The application of fresh start reporting on the
Predecessors balance sheet is as follows (amounts in
thousands):

|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |         |        |        | 
|------------------------------------------------------------ | ----------------------------------------- | --------------------------------- | ------------------------------------ | -------------- | ------ | ----------- | -------- | -------------- | ------ | ----------------- | ------- | -------- | ---- | -------- | -------- | -------- | ------ | -------- | ------- | ------- | ------ | ------ | 
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        | Successor        
|                                                             |                                           | Predecessor                       |                                      |                |        |             |          |                |        |                  
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        | Reorganized      
|                                                             |                                           | Before Fresh Start                |                                      | Extinguishment |        | Exchange of |          | Fresh Start &  |        | Balance Sheet    
|                                                             |                                           | November 22, 2002                 |                                      | of Debt        |        | Stock       |          | Exit Financing |        | November 22, 2002
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                  
|Current assets:                                              |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             | Cash and cash equivalents                 |                                   | $                                    | 26,211         |        |             | $        | (541           | )(a)   |                   | $       |         |      |          | $        |         |        |          | $       | 25,670  |       
|                                                             | Cash, restricted                          |                                   |                                      | 8,399          |        |             |          |               |        |                   |         |         |      |          |          | 99       |        |          |         | 8,498   |       
|                                                             | Accounts receivable, net of allowances    |                                   |                                      | 14,392         |        |             |          |               |        |                   |         |         |      |          |          | 110      |        |          |         | 14,502  |       
|                                                             | Inventories                               |                                   |                                      | 7,323          |        |             |          |               |        |                   |         |         |      |          |          |         |        |          |         | 7,323   |       
|                                                             | Prepaid expenses and other current assets |                                   |                                      | 8,540          |        |             |          |               |        |                   |         |         |      |          |          | 32,259   |        |          |         | 40,799  |       
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             |                                           |                                   | Total current assets                 |                |        | 64,865      |          |                |        | (541              | )       |          |      |         |          |          |        | 32,468   | (d)     |         |        | 96,792 | 
|Property and equipment, net                                  |                                           |                                   | 884,278                              |                |        |             |         |                |        |                   |        |          |      |          | (222,071 | )(d)     |        |          | 662,207 |        
|Deposits for capital expenditures                            |                                           |                                   | 14,665                               |                |        |             |         |                |        |                   |        |          |      |          | (1,012   | )(d)     |        |          | 13,653  |        
|Other assets                                                 |                                           |                                   | 3,323                                |                |        |             |         |                |        |                   |        |          |      |          | 9,051    | (d)      |        |          | 12,374  |        
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             |                                           | $                                 | 967,131                              |                |        | $           | (541     | )              |        | $                 |        |          |      | $        | (181,564 | )        |        | $        | 785,026 |        
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|Liabilities Not Subject to Compromise                        |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             | Current liabilities:                      |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |         |       
|                                                             |                                           | Accounts payable                  |                                      | $              | 12,736 |             |          | $              |       |                   |         | $        |     |          |          | $        |       |          |         | $       | 12,736 |       
|                                                             |                                           | Other accrued liabilities         |                                      |                | 41,989 |             |          |                | 12,466 | (a)               |         |          |     |          |          |          | 695    | (d)      |         |         | 55,150 |       
|                                                             |                                           | Advance deposits                  |                                      |                | 2,089  |             |          |                |       |                   |         |          |     |          |          |          |       |          |         |         | 2,089  |       
|                                                             |                                           | Current portion of long-term debt |                                      |                | 266    |             |          |                |       |                   |         |          |     |          |          |          | 14,284 | (d)      |         |         | 14,550 |       
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             |                                           |                                   | Total current liabilities            |                |        | 57,080      |          |                |        | 12,466            |         |          |      |         |          |          |        | 14,979   |         |         |        | 84,525 | 
|                                                             | Long-term debt                            |                                   |                                      | 7,215          |        |             |          | 86,038         | (a)    |                   |         |         |      |          |          | 294,776  | (d)    |          |         | 388,029 |       
|Deferred income taxes Liabilities subject to
    compromise  |                                           |                                   | 926,387                              |                |        |             | (562,276 | )(a)           |        |                   |        |          |      |          | (269,695 | )(d)     |        |          | 94,416  |        
|Minority interests                                           |                                           |                                   | 5,290                                |                |        |             |         |                |        |                   |        |          |      |          | (1,527   | )(d)     |        |          | 3,763   |        
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|Total liabilities                                            |                                           |                                   | 995,972                              |                |        |             | (463,772 | )              |        |                   |        |          |      |          | 38,533   |          |        |          | 570,733 |        
|Commitments and contingencies                                |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|Mandatorily redeemable 12.25% cumulative
    preferred stock |                                           |                                   |                                      |                |        |             |          |                |        |                   | 125,000 | (e)      |      |          |          |          |        |          | 125,000 |        
|Stockholders deficit:                                       |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             | Common stock (new)                        |                                   |                                      |               |        |             |          |               |        |                   |         | 70       | (e)  |          |          |         |        |          |         | 70      |       
|                                                             | Additional paid-in capital (new)          |                                   |                                      |               |        |             |          | 206,801        | (b)    |                   |         | (119,284 | )(e) |          |          | 1,706    | (d)    |          |         | 89,223  |       
|                                                             | Common stock (old)                        |                                   |                                      | 284            |        |             |          |               |        |                   |         | (284     | )(e) |          |          |         |        |          |         |        |       
|                                                             | Additional paid-in capital (old)          |                                   |                                      | 263,320        |        |             |          |               |        |                   |         | (263,320 | )(e) |          |          |         |        |          |         |        |       
|                                                             | Accumulated deficit                       |                                   |                                      | (290,567       | )      |             |          | 256,430        | (c)    |                   |         | 255,940  | (e)  |          |          | (221,803 | )(d)   |          |         |        |       
|                                                             | Accumulated other comprehensive loss      |                                   |                                      | (1,878         | )      |             |          |               |        |                   |         | 1,878    | (e)  |          |          |         |        |          |         |        |       
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             |                                           |                                   | Total stockholders equity (deficit) |                |        | (28,841     | )        |                |        | 463,231           |         |          |      | (125,000 | )        |          |        | (220,097 | )       |         |        | 89,293 | 
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        
|                                                             |                                           | $                                 | 967,131                              |                |        | $           | (541     | )              |        | $                 |        |          |      | $        | (181,564 | )        |        | $        | 785,026 |        
|                                                             |                                           |                                   |                                      |                |        |             |          |                |        |                   |         |          |      |          |          |          |        |          |         |        

F-16



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



---



|    |  |                                                                    
|--- |  | -------------------------------------------------------------------
|(a) |  | The reduction of pre-petition liabilities was
    achieved through:

|                       |  |   |         | 
|---------------------- |  | - | ------- | 
|Settlement in shares   |  | $ | 206,801 | 
|Cancellation of debt   |  |   | 256,430 | 
|Reinstated debt        |  |   | 86,038  | 
|Allowed claims accrued |  |   | 12,466  | 
|Claims paid in cash    |  |   | 541     | 
|                       |  |   |         | 
|                       |  | $ | 562,276 | 
|                       |  |   |         | 



|    |  |                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Issuance of new shares to the Senior Subordinated
    Note Holders, the CREST holders and the general unsecured
    creditors.
|(c) |  | Gain on cancellation of debt, calculated as
    follows:                                                                      

|                                                                                                      |  |   |          |  
|----------------------------------------------------------------------------------------------------- |  | - | -------- | -
|Liabilities subject to compromise (pre-emergence)                                                     |  | $ | 926,387  |  
|Liabilities settled and to be settled in cash and
    shares                                          |  |   | (489,503 | )
|Reinstated debt                                                                                       |  |   | (86,038  | )
|Remaining liabilities subject to compromise (for
    subsidiaries in Chapter 11 at December 31, 2002) |  |   | (94,416  | )
|                                                                                                      |  |   |          |  
|                                                                                                      |  | $ | 256,430  |  
|                                                                                                      |  |   |          |  



|    |  |                                                                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) |  | Represents the recording of the exit financing of
    $309 million (used to repay previous obligations, fund
    certain allowed claims and portions of certain required cash
    escrows) and fair value adjustments (primarily net write-down of
    fixed assets of $222.1 million).
|   
|(e) |  | Elimination of old equity.                                                                                                                                                                                                                                                             

The approximate allocation of the Companys
reorganization value as of November 22, 2002 is shown below:

|                                                                          |  |   |         | 
|------------------------------------------------------------------------- |  | - | ------- | 
|Long- term debt                                                           |  | $ | 388,000 | 
|Liabilities subject to compromise                                         |  |   | 94,400  | 
|Post-petition liabilities including current
    portion of long-term debt |  |   | 84,500  | 
|Mandatorily redeemable 12.25% cumulative
    preferred stock              |  |   | 125,000 | 
|New equity including minority interest                                    |  |   | 93,100  | 
|                                                                          |  |   |         | 
|                                                                          |  | $ | 785,000 | 
|                                                                          |  |   |         | 

3.     Liabilities
Subject to Compromise

Liabilities subject to compromise refers to known
liabilities incurred prior to the commencement of the
Chapter 11 cases, including those considered by the
Bankruptcy Court to be pre-petition claims. These liabilities
consist primarily of amounts outstanding under long-term debt
and also include accounts payable, accrued interest, and other
accrued expenses. These amounts represent the Companys
estimate of known or potential claims to be resolved in the
Chapter 11 cases. Such claims remain subject to future
adjustments. Adjustments may result from (1) negotiations;
(2) actions of the Bankruptcy Court; (3) further
development with respect to disputed claims; (4) proofs of
claim; or (5) other events.

F-17



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The principal categories of claims classified as
liabilities subject to compromise in the Chapter 11 Cases
as of December 31, 2002 and 2001, are identified below
(amounts in thousands):

|                                                                                  |  |                   |        |                   |  |   |         | 
|--------------------------------------------------------------------------------- |  | ----------------- | ------ | ----------------- |  | - | ------- | 
|                                                                                  |  | Successor         |        | Predecessor      
|                                                                                  |  |                   |        |                  
|                                                                                  |  | December 31, 2002 |        | December 31, 2001
|                                                                                  |  |                   |        |                  
|Long-term debt                                                                    |  | $                 | 91,421 |                   |  | $ | 485,774 | 
|Senior Subordinated Notes (including related
    accrued interest)                |  |                   |       |                   |  |   | 210,549 | 
|Preferred redeemable securities (including
    related accrued interest)  CRESTS |  |                   |       |                   |  |   | 197,218 | 
|Accrued liabilities (including accrued interest
    of $1,027)                    |  |                   |       |                   |  |   | 9,655   | 
|Accounts payable                                                                  |  |                   | 2,395  |                   |  |   | 22,698  | 
|                                                                                  |  |                   |        |                   |  |   |         | 
|                                                                                  |  | $                 | 93,816 |                   |  | $ | 925,894 | 
|                                                                                  |  |                   |        |                   |  |   |         | 

The Company recorded all transactions incurred as
a result of the Chapter 11 filing and the implementation of
fresh start reporting as reorganization items and classified
these separately on its income statement. For the Successor
period (November 23, 2002 to December 31, 2002),
though the Company continues to incur expenses related to its
reorganization proceedings, no items were classified as
reorganization items subsequent to its emergence from
Chapter 11, but instead are included in general
administrative and other expenses.

The table below summarizes the reorganization
items incurred by the Predecessor Company for the period
January 1, 2002 to November 22, 2002 and the year
ended December 31, 2001 (amounts in thousands):

|                                                            |  |      |          |      |  |   |        | 
|----------------------------------------------------------- |  | ---- | -------- | ---- |  | - | ------ | 
|                                                            |  | 2002 |          | 2001
|                                                            |  |      |          |     
|Net write-down of fixed assets (fresh start
    write-down) |  | $    | 222,071  |      |  | $ |       | 
|Fresh start adjustments other                              |  |      | (3,938   | )    |  |   |       | 
|Write-off of deferred financing costs                       |  |      |         |      |  |   | 21,517 | 
|Legal and professional fees                                 |  |      | 22,315   |      |  |   | 3,179  | 
|Other                                                       |  |      | 3,292    |      |  |   | 320    | 
|Gain on extinguishment of debt                              |  |      | (256,430 | )    |  |   |       | 
|                                                            |  |      |          |      |  |   |        | 
|                                                            |  | $    | (12,690  | )    |  | $ | 25,016 | 
|                                                            |  |      |          |      |  |   |        | 

4.     Accounts
Receivable, Net of Allowances

Accounts receivable, net of allowances are
comprised of (amounts in thousands):

|                                |  |                   |        |                   |  |   |        |  
|------------------------------- |  | ----------------- | ------ | ----------------- |  | - | ------ | -
|                                |  | Successor         |        | Predecessor      
|                                |  |                   |        |                  
|                                |  | December 31, 2002 |        | December 31, 2001
|                                |  |                   |        |                  
|Trade accounts receivable       |  | $                 | 11,684 |                   |  | $ | 12,473 |  
|Allowance for doubtful accounts |  |                   | (1,594 | )                 |  |   | (1,237 | )
|Other receivables               |  |                   | 591    |                   |  |   | 1,253  |  
|                                |  |                   |        |                   |  |   |        |  
|                                |  | $                 | 10,681 |                   |  | $ | 12,489 |  
|                                |  |                   |        |                   |  |   |        |  

F-18



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Allowances for doubtful accounts (amounts in
thousands):

|                                     |  |                |        |            |  |                |        |            |  |   |       |   |  |   |        |  
|------------------------------------ |  | -------------- | ------ | ---------- |  | -------------- | ------ | ---------- |  | - | ----- | - |  | - | ------ | -
|                                     |  | Balance at     |        |            |  |                |        | Balance at
|                                     |  | Beginning of   |        | Charged to |  | Write-offs and |        | End of    
|Description                          |  | Period         |        | Expenses   |  | Recoveries     |        | Period    
|                                     |  |                |        |            |  |                |        |           
|                                     |  |               
|                                     |  | (In Thousands)
|Provision for uncollectible accounts |  |                |        |            |  |                |        |            |  |   |       |   |  |   |        |  
|Year ended December 31, 2002         |  | $              | (1,237 | )          |  | $              | (1,467 | )          |  | $ | 1,110 |   |  | $ | (1,594 | )
|2001                                 |  |                | (1,400 | )          |  |                | (204   | )          |  |   | 367   |   |  |   | (1,237 | )
|2000                                 |  |                | (1,126 | )          |  |                | (241   | )          |  |   | (33   | ) |  |   | (1,400 | )

Of the $1,467 charged to expense during 2002,
$1,195 related to the Predecessor Company (January 1, 2002
to November 22, 2002) and $272 related to the Successor
Company (November 23, 2002 to December 31, 2002).

5.     Prepaid
Expenses and Other Current Assets

Prepaid expenses and other current assets are
comprised of (amounts in thousands):

|                                    |  |                   |        |                   |  |   |       | 
|----------------------------------- |  | ----------------- | ------ | ----------------- |  | - | ----- | 
|                                    |  | Successor         |        | Predecessor      
|                                    |  |                   |        |                  
|                                    |  | December 31, 2002 |        | December 31, 2001
|                                    |  |                   |        |                  
|Deposit for property taxes          |  | $                 | 9,100  |                   |  | $ | 3,776 | 
|Prepaid insurance                   |  |                   | 3,107  |                   |  |   | 1,077 | 
|Deposits and other prepaid expenses |  |                   | 2,911  |                   |  |   | 1,431 | 
|                                    |  |                   |        |                   |  |   |       | 
|                                    |  | $                 | 15,118 |                   |  | $ | 6,284 | 
|                                    |  |                   |        |                   |  |   |       | 

6.     Property and
Equipment

At December 31, 2002 and 2001, property and
equipment consisted of the following:

|                                               |  |                |       |                   |  |                   |         |   |  |   |           |  
|---------------------------------------------- |  | -------------- | ----- | ----------------- |  | ----------------- | ------- | - |  | - | --------- | -
|                                               |  | Useful         |       | Successor         |  | Predecessor      
|                                               |  | Lives          |       |                   |  |                  
|                                               |  | (Years)        |       | December 31, 2002 |  | December 31, 2001
|                                               |  |                |       |                   |  |                  
|                                               |  |               
|                                               |  | (In thousands)
|Land                                           |  |                |      |                   |  | $                 | 100,033 |   |  | $ | 116,434   |  
|Buildings and improvements                     |  |                | 10-40 |                   |  |                   | 485,400 |   |  |   | 849,549   |  
|Furnishings and equipment                      |  |                | 3-10  |                   |  |                   | 69,763  |   |  |   | 190,081   |  
|                                               |  |                |       |                   |  |                   |         |   |  |   |           |  
|                                               |  |                |       |                   |  |                   | 655,196 |   |  |   | 1,156,064 |  
|Less accumulated depreciation and amortization |  |                |       |                   |  |                   | (3,891  | ) |  |   | (249,882  | )
|Construction in progress                       |  |                |       |                   |  |                   | 13,260  |   |  |   | 7,786     |  
|                                               |  |                |       |                   |  |                   |         |   |  |   |           |  
|                                               |  |                |       |                   |  | $                 | 664,565 |   |  | $ | 913,968   |  
|                                               |  |                |       |                   |  |                   |         |   |  |   |           |  

In connection with the Companys emergence
from Chapter 11 on November 25, 2002, the Company
implemented fresh start reporting effective November 22,
2002. As a result, the Companys assets and liabilities
were based on their respective fair values. In this regard, the
Company recorded a net write-down of its fixed assets of
$222.1 million at November 22, 2002. This net
write-down is reflected in reorganization items.

In addition, the Company had evaluated the
recoverability of its long-lived assets in accordance with SFAS
No. 121 as of December 31, 2001 and had recorded
impairment losses for assets held for use, where the estimated
future undiscounted cash flows were insufficient to recover the
carrying value of those assets.

F-19



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Impairment of long-lived assets was
$67.3 million in 2001. The charge for the 2001 period was
comprised of $6.6 million related to revised estimates of
fair value for properties held for sale, $4.0 million
related to one property which was identified as held for sale
and also sold in 2001 and $69.0 million relating to a
charge to reduce the carrying value of certain of the
Companys hotels held for future use, offset by a recapture
of $12.3 million of impairment charges related to six
hotels that were previously considered held for sale that were
no longer being actively marketed for sale. Of the impairment
charges in the 2001 period, $69.0 million of the impairment
charges and the recapture of $8.5 million of previously
recognized impairment reserves were recorded in the fourth
quarter. In connection with its bankruptcy petition on
December 20, 2001, the Company determined that 29 of its
hotels were significantly overleveraged. Therefore, with the
approval of the Bankruptcy Court, the Company ceased paying
interest to the secured lenders of these properties from the
date of the bankruptcy petition. The Company also concluded that
it no longer had the ability to hold these hotels for a period
sufficient for their estimated future undiscounted cash flows to
cover their carrying values. Therefore in accordance with the
provisions of SFAS No. 121, the Company determined that an
impairment charge of $69.0 million was necessary to reduce
the carrying value of these assets. In connection with the
bankruptcy petition, the Company also ceased marketing for sale,
four operating properties that were previously classified as
held for sale. Since these assets were not considered impaired
as the estimated future cash flows from the use of these
properties exceeded their carrying values, the Company
recaptured $8.5 million of impairment reserves previously
recorded in 1999, 2000 and 2001.

7.     Other Accrued
Liabilities

At December 31, 2002 and 2001, other accrued
liabilities consisted of the following:

|                                                               |  |                   |        |                   |  |   |        |  
|-------------------------------------------------------------- |  | ----------------- | ------ | ----------------- |  | - | ------ | -
|                                                               |  | Successor         |        | Predecessor      
|                                                               |  |                   |        |                  
|                                                               |  | December 31, 2002 |        | December 31, 2001
|                                                               |  |                   |        |                  
|                                                               |  |                  
|                                                               |  | (In thousands)   
|Salaries and related costs                                     |  | $                 | 17,293 |                   |  | $ | 13,105 |  
|Property and sales taxes                                       |  |                   | 16,668 |                   |  |   | 16,518 |  
|Professional fees                                              |  |                   | 807    |                   |  |   | 1,048  |  
|Provision for state income taxes                               |  |                   | 2,219  |                   |  |   | 2,700  |  
|Franchise fee accrual                                          |  |                   | 1,388  |                   |  |   | 1,501  |  
|Accrued interest                                               |  |                   | 1,524  |                   |  |   | 1,192  |  
|Accrual for allowed claims                                     |  |                   | 1,749  |                   |  |   |       |  
|Other                                                          |  |                   | 2,477  |                   |  |   | 3,541  |  
|                                                               |  |                   |        |                   |  |   |        |  
|                                                               |  |                   | 44,125 |                   |  |   | 39,605 |  
|Less amounts included in liabilities subject to
    compromise |  |                   |       |                   |  |   | (8,628 | )
|                                                               |  |                   |        |                   |  |   |        |  
|                                                               |  | $                 | 44,125 |                   |  | $ | 30,977 |  
|                                                               |  |                   |        |                   |  |   |        |  

8.     Other
Long-Term Debt and Redeemable Securities

The Company emerged from Chapter 11 on
November 25, 2002. Upon emergence, the Convertible
Redeemable Equity Structured Trusts Securities
(CRESTS) and the Senior Subordinated Notes (the
Notes) were converted to other securities of the
Company. The CRESTS were exchanged for 868,000 shares of common
stock, warrants to purchase 1,258,815 shares of common stock at
an exercise price of $18.29 (Class A warrants) and warrants
to purchase 251,062 of common stock at an exercise price of
$25.44 (Class B warrants). The Notes were exchanged for
4,690,600 shares of preferred stock and 5,557,511 shares of
common stock. The carrying value of the CRESTS, prior to the
Companys emergence from Chapter 11, approximated
$197.2 million (including accrued interest) and previously
accrued interest at the rate of 7% per annum,

F-20



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

compounded quarterly. The carrying value of the
Notes (including accrued interest) prior to the Companys
emergence from Chapter 11 approximated $210.5 million and
accrued interest at the rate of 12.25%. Fixed loans
approximating $86.0 million, secured by 21 hotel
properties, were reinstated on their original terms, except for
extension of certain maturities.

In addition, on November 25, 2002, the
Company closed on its exit financing facility of
$309 million arranged with and through Merrill Lynch
Mortgage Lending, Inc (Merrill). This financing is
secured by 57 hotel properties. The proceeds from the exit
financing facility were used primarily to repay previous
mortgage debts approximating $262.3 million, to fund
property tax claims and portions of the various cash escrows,
required under the exit financing facility. The exit financing
is comprised of three separate components as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Senior debt of $224.0 million which accrues
    interest at the rate of LIBOR plus 2.2442%, secured by, among
    other things, first mortgage liens on the fee simple and
    leasehold interests in 55 of the Companys hotels.                                                                                                                                                           
|
| |  | Mezzanine debt of $78.7 million which
    accrues interest at the rate of LIBOR plus 9.00% secured by the
    equity interest in the subsidiaries of the 56 hotels (the 55
    which secure the Senior Debt and one additional hotel).                                                                                                                                                      
|
| |  | Canadian debt provided through Computershare
    Trust Company of Canada, a Canadian lender, of
    $10.0 million Canadian dollars (equates to approximately
    $6.3 million U.S. dollars at December 31, 2002) which
    is a fixed interest facility, maturing in December 2007 and
    which accrues interest at the rate of 7.879% (secured by a
    mortgage on the Windsor property).

As permitted by the terms of the Senior and
Mezzanine debt created as part of the exit financing provided by
Merrill Lynch Mortgage Lending, Inc. (Merrill), the
amounts of these loans may be adjusted or resized
prior to a securitization of the mortgage loan. Merrill has
exercised this right and the Senior and Mezzanine debt were
resized in March 2003. The principal amount of the Mortgage Loan
was decreased from $223.5 million (initially $224.0 less
$0.5 million of principal payments) to $218.1 million, and
the initial principal amount of the Mezzanine Loan was increased
from $78.7 million to $84.1 million.

The Senior and Mezzanine debts, which together
approximated $302.7 million at origination, carry a blended
rate of LIBOR plus 4.00% and mature in November 2004. There are,
however, three one-year options to renew which could extend the
facility for an additional three years. The first option to
extend the maturity date of the Senior and Mezzanine debt by one
year (i.e. to November 2005) is available only if no events of
default occur in respect of the payments of principal, interest
and other required payments. The second and third extension
terms are available only if no events of default (as defined by
the agreement) exist and are subject to minimum Debt Service
Coverage Ratio and Debt Yield requirements. Payments of
principal and interest on all three portions of the facility are
due monthly; however, the principal payments on the Senior and
Mezzanine debts may be deferred during the first twelve months
of the agreement. The Senior and Mezzanine debt agreements
provide that when either the Debt Yield (as defined) for the
trailing 12-month period is below 12.75% during the first year
of the loan ending November 2003 (13.25% during the second year)
or the Debt Service Coverage Ratio (as defined) is below 1.20,
excess cash flows (after payment of operating expenses,
management fees, required reserves, principal and interest)
produced by the 56 properties must be deposited in a special
deposit account and cannot be transferred to the parent company,
but can be used for capital expenditures on these properties
with lenders approval, or principal and interest payments.
Funds placed into the special deposit account are released to
the borrowers when the Debt Yield and the Debt Service Coverage
Ratio are above the minimum requirements for three consecutive
months. The Company anticipates that as of March 31, 2003,
the Debt Yield for the 56 properties will be below the 12.75%
threshold, and therefore, any excess cash produced by the 56
properties will be retained in the special deposit account until
the Debt Yield is above the minimum.

F-21



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company through its wholly owned subsidiaries
owes approximately $11.4 million under Industrial Revenue Bonds
(IRBs) issued on the Holiday Inn Lawrence,
Kansas and Holiday Inn Manhattan, Kansas properties. The
IRBs require a minimum debt service coverage ratio
(DSCR) (as defined). For the year ended
December 31, 2002, the cash flows of the two properties
were insufficient to meet the minimum DSCR requirements due in
part to renovations that were being performed at the properties
during 2002. The trustee of the IRBs may give notice of
default at which time the Company could remedy the default by
depositing with the trustee an amount estimated at less than $1
million. In the event a default is declared and not cured, the
properties could be subject to foreclosure and the Company would
be obligated pursuant to a partial guaranty in an amount not to
exceed $1.4 million.

Long-term obligations at December 31, 2002
and 2001 consisted of the following (amounts in thousands):

|                                                                                                            |  |           |         |             |  |   |          |  
|----------------------------------------------------------------------------------------------------------- |  | --------- | ------- | ----------- |  | - | -------- | -
|                                                                                                            |  | Successor |         | Predecessor
|                                                                                                            |  | 2002      |         | 2001       
|                                                                                                            |  |           |         |            
|Exit financing  Mortgage notes payable
    with interest at LIBOR plus 2.2442%  matures November
    2004 |  | $         | 224,036 |             |  | $ |         |  
|Exit financing  Mortgage notes payable
    with interest at LIBOR plus 9%  matures November 2004          |  |           | 78,671  |             |  |   |         |  
|Exit financing  Mortgage notes payable
    with interest at 7.87%  matures December 2007                  |  |           | 6,339   |             |  |   |         |  
|Mortgage notes 7.3% to 10.7%                                                                                |  |           | 82,887  |             |  |   | 7,451    |  
|Liabilities subject to compromise                                                                           |  |           | 91,421  |             |  |   | 685,775  |  
|Mortgage notes  prime plus 0.25%                                                                           |  |           | 7,447   |             |  |   | 7,918    |  
|Other                                                                                                       |  |           | 2,594   |             |  |   |         |  
|                                                                                                            |  |           |         |             |  |   |          |  
|Total                                                                                                       |  | $         | 493,395 |             |  | $ | 701,144  |  
|Less current portion                                                                                        |  |           | (14,550 | )           |  |   | (7,717   | )
|                                                                                                            |  |           |         |             |  |   |          |  
|                                                                                                            |  |           | 478,845 |             |  |   | 693,427  |  
|Less subject to compromise                                                                                  |  |           | (91,421 | )           |  |   | (685,775 | )
|                                                                                                            |  |           |         |             |  |   |          |  
|                                                                                                            |  | $         | 387,424 |             |  | $ | 7,652    |  
|                                                                                                            |  |           |         |             |  |   |          |  

Substantially all of the Companys property
and equipment is pledged as collateral for long-term
obligations. Certain of the mortgage notes are subject to a
prepayment penalty if repaid prior to their maturity.

On May 20, 2001, promissory notes of
approximately $3.9 million secured by the pledge of 100% of
the equity interests of Macon Hotel Associates, L.L.C.
(MHA) were due. The Company owns a 60% controlling
interest in MHA. MHAs sole asset is the Crowne Plaza Hotel
located in Macon, Georgia. MHA did not make this payment on
May 20, 2001. MHA was not included in the entities that
filed for reorganization under Chapter 11. On
April 19, 2002, MHA and the lenders entered into a
Satisfaction and Release Agreement whereby the lenders agreed to
fully discharge the indebtedness under the promissory note of
$3.9 million plus related accrued interest approximating
$0.7 million in exchange for payment by MHA of
$0.2 million. The resulting gain on extinguishment of this
indebtedness of $4.4 million is recorded in these financial
statements within interest income and other on the consolidated
statement of operations.

The Company is subject to certain property
maintenance and quality standard compliance requirements under
its franchise agreements. The Company periodically receives
notifications from its franchisors of events of noncompliance
with such agreements. In the past, management has cured most
cases of noncompliance within the applicable cure periods and
the events of noncompliance did not result in events of default
under the respective loan agreements. However, in selected
situations, as warranted, based on economic evaluations,

F-22



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

management may elect to not comply with the
franchisor requirements. In such situations, the Company will
either select an alternative franchisor or operate the property
independent of any franchisor.

Maturities of long-term obligations for each of
the five years after December 31, 2002, and thereafter are
as follows (amounts in thousands):

|                      |  |   |         | 
|--------------------- |  | - | ------- | 
|2003                  |  | $ | 14,550  | 
|2004                  |  |   | 326,667 | 
|2005                  |  |   | 4,048   | 
|2006                  |  |   | 4,429   | 
|2007                  |  |   | 13,328  | 
|Thereafter            |  |   | 38,952  | 
|                      |  |   |         | 
|                      |  |   | 401,974 | 
|Subject to compromise |  |   | 91,421  | 
|                      |  |   |         | 
|                      |  | $ | 493,395 | 
|                      |  |   |         | 

9.     Stockholders
Equity and Preferred Stock

On the Companys emergence from
Chapter 11, the following securities became available for
issuance:



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | Common stock, 7,000,000 shares, par value $0.01.                              
|
| |  | Preferred stock, 5,000,000, par value $0.01,
    initial liquidation value $25
|
| |  | Class A and B warrants                                                        

The new common stock is subject to dilution by
the Class A & Class B warrants, any incentive
shares and any future shares.

The new preferred stock accumulates dividend at
the rate of 12.25%, is cumulative and is compounded annually.
The dividend payable on November 25, 2003 is payable via
the issuance of additional shares of preferred stock. The board
of directors will determine whether the dividends due
November 25, 2004 and 2005 will be paid in cash or kind via
the issue of additional shares of preferred stock. The new
preferred stock is subject to redemption at any time, at the
Companys option (including a premium during the first five
years) and to mandatory redemption on November 25, 2012. If
the preferred stock is redeemed during the first five years, the
premium payable is 5%, and the premium is reduced by 1% each
year succeeding year through 2007. This premium percentage would
be applied against the preferred stock plus any dividends
outstanding.

The Class A warrants initially provide for
the purchase of 1,510,638 shares of new common stock at an
exercise price of $18.29 per share and expire on
November 25, 2007.

The Class B warrants initially provide for
the purchase of 1,029,366 shares of new common stock at an
exercise price of $25.44 per share and expire on
November 25, 2009.

10.     Derivative
Transactions

In connection with the exit financing arranged
with and by Merrill Lynch Mortgage Lending, Inc., in November
2002, the Company purchased two interest rate cap agreements.
These instruments have the effect of limiting the interest rate
exposure associated with the Senior and the Mezzanine portion of
the exit financing so that the interest payable on these
obligations effectively becomes variable only up to a LIBOR rate
of 6.4375%. The notional amounts of the two interest rate caps
and their termination dates match the principal amounts and
maturities of the outstanding amounts on these loans. The fair
value of these two

F-23



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

instruments at December 31, 2002
approximated $0.1 million and is included in other assets on the
balance sheet. Changes in the fair market values are reflected
in interest expense.

11.     Income
Taxes

Provision (benefit) for income taxes for the
Company is as follows:

|                |  |                         |        |                    |  |                    |   |         |  |          |        |       |  |         |       |          |  |       |   |  |  |   |       |  |  |   |       |  |  |   |         |   |  |   |         |  
|--------------- |  | ----------------------- | ------ | ------------------ |  | ------------------ | - | ------- |  | -------- | ------ | ----- |  | ------- | ----- | -------- |  | ----- | - |  |  | - | ----- |  |  | - | ----- |  |  | - | ------- | - |  | - | ------- | -
|                |  |                        
|                |  | Year Ended December 31,
|                |  |                         |        |                    |  |                   
|                |  | 2002                    |        | 2001 (Predecessor) |  | 2000 (Predecessor)
|                |  |                         |        |                    |  |                   
|                |  | Current (1)             |        | Deferred           |  | Total              |   | Current |  | Deferred |        | Total |  | Current |       | Deferred |  | Total
|                |  |                         |        |                    |  |                    |   |         |  |          |        |       |  |         |       |          |  |      
|                |  |                        
|                |  | (In thousands)         
|Federal         |  | $                       | (430   | )                  |  | $                  |  |         |  | $        | (430   | )     |  | $       |      |          |  | $     |  |  |  | $ |      |  |  | $ |      |  |  | $ | (28,187 | ) |  | $ | (28,187 | )
|State and local |  |                         | (898   | )                  |  |                    |  |         |  |          | (898   | )     |  |         | 2,829 |          |  |       |  |  |  |   | 2,829 |  |  |   | 1,340 |  |  |   | (1,876  | ) |  |   | (536    | )
|                |  |                         |        |                    |  |                    |   |         |  |          |        |       |  |         |       |          |  |       |   |  |  |   |       |  |  |   |       |  |  |   |         |   |  |   |         |  
|                |  | $                       | (1,328 | )                  |  | $                  |  |         |  | $        | (1,328 | )     |  | $       | 2,829 |          |  | $     |  |  |  | $ | 2,829 |  |  | $ | 1,340 |  |  | $ | (30,063 | ) |  | $ | (28,723 | )
|                |  |                         |        |                    |  |                    |   |         |  |          |        |       |  |         |       |          |  |       |   |  |  |   |       |  |  |   |       |  |  |   |         |   |  |   |         |  



---

(1) This is comprised of (amounts in
thousands):

|                |  |                   |    |                   |  |   |        |  
|--------------- |  | ----------------- | -- | ----------------- |  | - | ------ | -
|                |  | Successor         |    | Predecessor      
|                |  |                   |    |                  
|                |  | November 23, to   |    | January 1, to    
|                |  | December 31, 2002 |    | November 22, 2002
|                |  |                   |    |                  
|Federal         |  | $                 |   |                   |  | $ | (430   | )
|State and local |  |                   | 32 |                   |  |   | (930   | )
|                |  |                   |    |                   |  |   |        |  
|                |  | $                 | 32 |                   |  | $ | (1,360 | )
|                |  |                   |    |                   |  |   |        |  

The components of the cumulative effect of
temporary differences in the deferred income tax
(liability) and asset balances at December 31, 2002
and 2001 are as follows:

|                                         |                          |                |        |                  |   |             |       |        |   |         |        |             |   |   |         |         |   |   |       |        |   |   |         |         |  
|---------------------------------------- | ------------------------ | -------------- | ------ | ---------------- | - | ----------- | ----- | ------ | - | ------- | ------ | ----------- | - | - | ------- | ------- | - | - | ----- | ------ | - | - | ------- | ------- | -
|                                         |                          |                |        |                 
|                                         |                          | 2002 Successor |        | 2001 Predecessor
|                                         |                          |                |        |                 
|                                         |                          | Total          |        | Current          |   | Non-Current |       | Total  |   | Current |        | Non-Current
|                                         |                          |                |        |                  |   |             |       |        |   |         |        |            
|                                         |                          |               
|                                         |                          | (In thousands)
|Property and equipment                   |                          | $              | 40,609 |                  |   | $           |      |        |   | $       | 40,609 |             |   | $ | (36,208 | )       |   | $ |      |        |   | $ | (36,208 | )      
|Net operating loss carry forwards        |                          |                | 79,909 |                  |   |             |      |        |   |         | 79,909 |             |   |   | 94,471  |         |   |   |      |        |   |   | 94,471  |        
|Loan costs                               |                          |                |       |                  |   |             |      |        |   |         |       |             |   |   | 8,349   |         |   |   |      |        |   |   | 8,349   |        
|Legal and workers compensation reserves |                          |                | 2,918  |                  |   |             | 2,918 |        |   |         |       |             |   |   | 1,880   |         |   |   | 1,880 |        |   |   |        |        
|AMT and FICA credit carry forwards       |                          |                | 2,092  |                  |   |             |      |        |   |         | 2,092  |             |   |   | 2,245   |         |   |   |      |        |   |   | 2,245   |        
|Other operating accruals                 |                          |                | 2,301  |                  |   |             | 2,301 |        |   |         |       |             |   |   | 2,586   |         |   |   | 2,586 |        |   |   |        |        
|Other                                    |                          |                | (205   | )                |   |             | (205  | )      |   |         |       |             |   |   | (304    | )       |   |   |      |        |   |   | (304    | )      
|                                         |                          |                |        |                  |   |             |       |        |   |         |        |             |   |   |         |         |   |   |       |        |   |   |         |        
|                                         | Total                    |                |        | 127,624          |   |             |       | 5,014  |   |         |        | 122,610     |   |   |         | 73,019  |   |   |       | 4,466  |   |   |         | 68,553  |  
|                                         | Less valuation allowance |                |        | (127,624         | ) |             |       | (5,014 | ) |         |        | (122,610    | ) |   |         | (73,019 | ) |   |       | (4,466 | ) |   |         | (68,553 | )
|                                         |                          |                |        |                  |   |             |       |        |   |         |        |             |   |   |         |         |   |   |       |        |   |   |         |        
|                                         |                          | $              |       |                  |   | $           |      |        |   | $       |       |             |   | $ |        |         |   | $ |      |        |   | $ |        |        
|                                         |                          |                |        |                  |   |             |       |        |   |         |        |             |   |   |         |         |   |   |       |        |   |   |         |        

F-24



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The difference between income taxes using the
effective income tax rate and the federal income tax statutory
rate of 34% is as follows:

|                                                           |  |                   |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------- |  | ----------------- | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                           |  |                   |        |                  
|                                                           |  | Successor         |        | Predecessor      
|                                                           |  |                   |        |                  
|                                                           |  | November 23 to    |        | January 1 to      |  |     
|                                                           |  | December 31, 2002 |        | November 22, 2002 |  | 2001 |         | 2000
|                                                           |  |                   |        |                   |  |      |         |     
|                                                           |  |                  
|                                                           |  | (In thousands)   
|Federal income tax (benefit) at statutory
    federal rate |  | $                 | (3,160 | )                 |  | $    | 3,742   |      |  | $ | (47,578 | ) |  | $ | (39,670 | )
|State income tax (benefit), net                            |  |                   | (732   | )                 |  |      | (12,929 | )    |  |   | (6,717  | ) |  |   | (5,601  | )
|Effect of cancellation of debt                             |  |                   |       |                   |  |      | (40,848 | )    |  |   |        |   |  |   |        |  
|Non-deductible items                                       |  |                   | (74    | )                 |  |      | (1,932  | )    |  |   | 177     |   |  |   | 476     |  
|Change in valuation allowance                              |  |                   | 3,998  |                   |  |      | 50,607  |      |  |   | 56,947  |   |  |   | 16,072  |  
|                                                           |  |                   |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|                                                           |  | $                 | 32     |                   |  | $    | (1,360  | )    |  | $ | 2,829   |   |  | $ | (28,723 | )
|                                                           |  |                   |        |                   |  |      |         |      |  |   |         |   |  |   |         |  

At December 31, 2002, the Company has
established a valuation allowance of $127.6 million to
reduce the net deferred tax assets to zero. As a result of the
Companys history of losses, the Company believed that it
was more likely than not that its net deferred tax assets would
not be realized and thus provided a valuation allowance to fully
reserve against such amounts. Of the $127.6 million, $54.6
and $56.9 million was generated in 2002 and 2001,
respectively. At December 31, 2002, the Company has
available net operating loss carry forwards of approximately
$206 million for federal income tax purposes, which expire
in years 2004 through 2021. Under the Plan of Reorganization,
substantial amounts of net operating loss carry forwards were
utilized to offset income from debt cancellations. In November
2002, the Company had an ownership change as defined in
Section 382 of the Internal Revenue Code. The
Companys ability to use these net operating loss carry
forwards to offset future income is subject to limitations. Due
to these limitations, a portion or all of these net operating
loss carry forwards could expire unused.

12.     Related Party
Transactions

Richard Cartoon, the Companys Executive
Vice President and Chief Financial Officer, is a principal in a
business that the Company retained in November 2001 to provide
Richard Cartoons services as Chief Financial Officer and
other restructuring support and services. In addition to amounts
paid for Richard Cartoons services, the Company has been
billed $22,000, $357,000 and $90,000 for other support and
services provided by associates of Richard Cartoon, LLC for the
Successor period ended December 31, 2002, the Predecessor
period ended November 22, 2002 and the period
October 1, 2001 to December 31, 2001.

F-25



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

13.     Earnings Per
Share

The following table sets forth the computation of
basic and diluted earnings per common share (EPS):

|                                                        |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |         |  
|------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------- | - | ----------------- | - | ---- | - | ------ |  |  | - | -------- | - |  | - | ------- | -
|                                                        |                                                                                               |                                       |   |                  
|                                                        |                                                                                               | Successor                             |   | Predecessor      
|                                                        |                                                                                               |                                       |   |                  
|                                                        |                                                                                               | November 23, 2002                     |   | January 1, to     |   |     
|                                                        |                                                                                               | to December 31, 2002                  |   | November 22, 2002 |   | 2001 |   | 2000  
|                                                        |                                                                                               |                                       |   |                   |   |      |   |       
|                                                        |                                                                                               |                                      
|                                                        |                                                                                               | (In thousands, except per share data)
|Numerator:                                              |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |        
|                                                        | Net (loss) income                                                                             |                                       | $ | (9,326            | ) |      | $ | 12,366 |  |  | $ | (142,764 | ) |  | $ | (87,955 | )
|                                                        | Preferred stock dividend                                                                      |                                       |   | (1,510            | ) |      |   |       |  |  |   |         |   |  |   |        |  
|                                                        |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |        
|                                                        | Net (loss) income attributable to common
    stock                                            |                                       | $ | (10,836           | ) |      | $ | 12,366 |  |  | $ | (142,764 | ) |  | $ | (87,955 | )
|                                                        |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |        
|Denominator:                                            |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |        
|                                                        | Denominator for basic and diluted
    (loss) earnings per share  weighted-average
    shares |                                       |   | 7,000             |   |      |   | 28,480 |  |  |   | 28,350   |   |  |   | 28,186  |  
|                                                        |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |        
|Basic and diluted (loss) earnings per common
    share: |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |        
|                                                        | Net (loss) income (net of preferred stock
    dividend)                                       |                                       | $ | (1.55             | ) |      | $ | 0.43   |  |  | $ | (5.04    | ) |  | $ | (3.12   | )
|                                                        |                                                                                               |                                       |   |                   |   |      |   |        |  |  |   |          |   |  |   |        

The computation of diluted EPS for the Successor
period ended December 31, 2002, as calculated above, did
not include shares associated with the assumed conversion of the
Class A and B warrants because their inclusion would have
been antidilutive. The computation of diluted EPS for the
Predecessor period ended November 22, 2002 and the years
ended December 31, 2001 and 2000, as calculated above, did
not include shares associated with the assumed conversion of the
CRESTS (8,169,935 shares) or stock options because their
inclusion would have been antidilutive.

14.     Commitments
and Contingencies

Sixteen of the Companys hotels are subject
to long-term ground leases, parking and other leases expiring
from 2004 through 2075 which provide for minimum payments as
well as incentive rent payments. In addition, most of the
Companys hotels have non-cancellable operating leases,
mainly for operating equipment. For the Successor period ended
December 31, 2002, the Predecessor periods ended
November 22, 2002 and the years ended December 31,
2001 and 2000, lease expense for the non-cancellable ground,
parking and other leases were approximately, $387,000,
$3,000,000, $3,683,000 and $3,646,000, respectively.

F-26



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

At December 31, 2002, the future minimum
commitments for non-cancellable ground, parking and other leases
were as follows (amounts in thousands):

|           |  |   |        | 
|---------- |  | - | ------ | 
|2003       |  | $ | 2,929  | 
|2004       |  |   | 3,026  | 
|2005       |  |   | 3,060  | 
|2006       |  |   | 3,076  | 
|2007       |  |   | 3,059  | 
|Thereafter |  |   | 78,691 | 
|           |  |   |        | 
|           |  | $ | 93,841 | 
|           |  |   |        | 

The Company has entered into license agreements
with various hotel chains which require annual payments for
license fees, reservation services and advertising fees. The
license agreements generally have original terms of between 10
and 20 years. The licensors may require the Company to
upgrade its facilities at any time to comply with the
licensors then current standards. Upon the expiration of
the term of a license, the Company may apply for a license
renewal. In connection with the renewal of a license, the
licensor may require payment of a renewal fee, increase license,
reservation and advertising fees, as well as substantial
renovation of the facility. Costs incurred in connection with
these agreements totaled approximately $1,975,000, $24,324,000,
$28,584,000 and $34,904,000 for the Successor period ended
December 31, 2002, the Predecessor period ended
November 22, 2002, and the years ended December 31,
2001, and 2000, respectively.

As of March 21, 2003, the Company was not in
strict compliance with the terms of eighteen of its franchise
agreements and has received termination notices from franchisors
with respect to six of these eighteen properties. While it is
the Companys belief that it will cure any defaults under
the franchise agreements before the applicable termination date,
there can be no assurance that it will be able to do so or be
able to obtain additional time in which to cure any defaults. In
the event of a franchise termination, management would seek to
license the hotel with another nationally-recognized brand.

The license agreements are subject to
cancellation in the event of a default, including the failure to
operate the hotel in accordance with the quality standards and
specification of the licensors. The Company believes that the
loss of a license for any individual hotel would not have a
material adverse effect on the Companys financial
condition and results of operations. The Company believes it
will be able to renew its current licenses or obtain
replacements of a comparable quality.

The Company has maintenance agreements, primarily
on a one to three year basis, which resulted in expenses of
approximately $317,000, $3,004,000, $4,509,000 and $5,473,000
for the Successor period ended December 31, 2002, the
Predecessor period ended November 22, 2002 and the years
ended December 31, 2001 and 2000, respectively.

The Company is contingently liable with respect
to three irrevocable letters of credit totaling
$4.9 million issued as guarantees to Zurich American
Insurance Company, Donlen Fleet Management Services and U.S.
Food Services. The letters of credit expire in November 2003 but
may require renewal beyond those dates.

The Company is self insured up to certain limits
(deductibles) with respect to employee medical, employee
dental, property insurance, general liability insurance,
personal injury claims, workers compensation and auto
liability. Should unanticipated events cause these claims to
escalate beyond normal expectations, the Companys
financial condition and results of operations could be adversely
affected.

The Company was a party in litigation with
Hospitality Restoration and Builders, Inc. (HRB), a
general contractor hired to perform work on six of the
Companys hotels. The litigation involved hotels in

F-27



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Texas, Illinois, and New York. In general, HRB
claimed that the Company breached contracts to renovate the
hotels by not paying for work performed. The Company contended
that it was over-billed by HRB and that a significant portion of
the completed work was defective. In July 2001, the parties
agreed to settle the litigation pending in Texas and Illinois.
In exchange for mutual dismissals and full releases, the Company
paid HRB $750,000. With respect to the matter pending in the
state of New York, HRB claimed that it was owed
$10.7 million. The Company asserted a counterclaim of
$7 million. In February 2003, the Company and HRB agreed to
settle the litigation pending in the state of New York. In
exchange for mutual dismissals and full releases, the Company
agreed to pay HRB $625,000. The Company has fully provided for
this liability in its Consolidated Financial Statements.

The Company is a party to other legal proceedings
arising in the ordinary course of business, the impact of which
would not, either individually or in the aggregate, in
managements opinion, have a material adverse effect on its
financial position or results of operations.

There are other pre-bankruptcy petition
litigations and claims pending against the Company but the
Companys exposure to such litigations and claims is
limited to the Disputed Claims Reserve.

15.     Employee
Retirement Plans and Stock Option Plan

The Company makes contributions to several
multi-employer pension plans for employees of various
subsidiaries covered by collective bargaining agreements. These
plans are not administered by the Company and contributions are
determined in accordance with provisions of negotiated labor
contracts. Certain withdrawal penalties may exist, the amount of
which are not determinable at this time. The cost of pension
contributions (for unionized and one group of non-union
employees) during the Successor period ended December 31,
2002, the Predecessor period ended November 22, 2002 and
the years ended December 31, 2001 and 2000, were
approximately $27,000, $185,000, $269,000 and $503,000,
respectively.

The Company adopted a 401(k) plan for the benefit
of its non-union and one group of union employees under which
participating employees may elect to contribute up to 10%
(increased to 15% as of January 1, 2003) of their
compensation. The Company matches an employees elective
contributions to the 401(k) plan, subject to certain conditions.
These employer contributions vest immediately. The cost of these
contributions for the year ended December 31, 2001, and
2000 were $410,000 and $505,000, respectively. The Company has
accrued $45,000 and $330,000 for the Successor period ended
December 31, 2002 and the Predecessor period ended
November 22, 2002, respectively.

Prior to the Companys Chapter 11
filing, the Company had adopted the Lodgian, Inc. Stock Option
Plan, as amended, (the Option Plan) whereby, options
to acquire up to 3,250,000 shares of common stock were granted
to employees, directors, independent contractors and agents as
determined by a committee appointed by the Board of Directors.
Options could not be granted at an exercise price which was less
than the fair market value on the date of grant. These options
vested over five years. In addition, in June 2001 and October
2000, each non-employee director was awarded an option to
acquire 5,000 shares of common stock at an exercise price equal
to the fair market price on date of grant. Such options became
exercisable upon date of grant and were granted under the
Companys Non-Employee Directors Stock Plan. However,
in connection with the Companys emergence from
Chapter 11, the previous common shares were cancelled along
with any options to acquire these shares.

On November 25, 2002, the Company adopted a
new Stock Incentive Plan (the Stock Incentive Plan)
which replaced the Option Plan previously in place. In
accordance with the Stock Incentive Plan, awards to acquire up
to 1,060,000 shares of common stock could be granted to officers
or other key employees or consultants of the Company as
determined by a committee appointed by the Board of Directors.
Awards may consist of stock options, stock appreciation rights,
stock awards, performance share awards, section 162(m) awards or
other awards determined by the committee. Stock options granted
pursuant to the Stock Incentive

F-28



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Plan cannot be granted at an exercise price which
is less than 100% of the fair market value per share on the date
of the grant. Vesting, exercisability, payment and other
restrictions pertaining to any awards made pursuant to the Stock
Incentive Plan are determined by the committee. As of
December 31, 2002, no awards had been made pursuant to the
Stock Incentive Plan.

Presented below is a summary of the stock option
plan activity for the years shown:

|                                         |           |         |           |                  |      |   |      |      |       
|---------------------------------------- | --------- | ------- | --------- | ---------------- | ---- | - | ---- | ---- | ------
|                                         |           |         |           | Weighted Average
|                                         |           | Options |           | Exercise Price  
|                                         |           |         |           |                 
|Balance, December 31, 1999 (Predecessor) |           |         | 2,604,000 |                  |      | $ | 4.14 |     
|                                         | Granted   |         |           | 60,000           |      |   |      | 3.39 |       
|                                         | Exercised |         |           |                 |      |   |      |     |       
|                                         | Forfeited |         |           | (528,900         | )    |   |      | 5.98 |       
|                                         |           |         |           |                  |      |   |      |     
|Balance, December 31, 2000 (Predecessor) |           |         | 2,135,100 |                  |      |   | 5.56 |     
|                                         | Granted   |         |           | 2,500,000        | (1   |   |      |      | ) 0.90
|                                         | Exercised |         |           |                 |      |   |      |     |       
|                                         | Forfeited |         |           | (3,130,500       | )(1) |   |      | 2.01 |       
|                                         |           |         |           |                  |      |   |      |     
|Balance, December 31, 2001(Predecessor)  |           |         | 1,504,600 |                  |      |   | 5.44 |     
|                                         | Forfeited |         |           | (1,504,600       | )    |   |      | 5.44 |       
|                                         |           |         |           |                  |      |   |      |     
|Balance, November 22, 2002               |           |         |          |                  |      | $ |     |     
|                                         |           |         |           |                  |      |   |      |     



---



| |     |                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes 2 million options granted to and
    forfeited by Thomas Arasi during 2001 and does not include
    1 million options granted to David Hawthorne, which were
    never issued and which expired on the Companys bankruptcy
    filing.

Options exercisable and the weighted average
exercise price of these options at December 31, 2001 and
2000 were, 1,341,200 and $5.21 and 1,664,100 and $5.45,
respectively.

The income tax benefit, if any, associated with
the exercise of stock options was credited to additional paid-in
capital. Also at December 31, 2001, there were 112,500
Stock Appreciation Rights exercisable at $6.13 per right.

The fair value of each option grant was estimated
to be nil for 2002 as a result of the Companys filing for
Chapter 11 December 20, 2001 and the cancellation of
all stock options on its emergence from Chapter 11 on
November 25, 2002 (November 22, 2002 for accounting). The
fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for those options
granted in 2001 and 2000:

|                        |  |             |       |      |  |  |       |  
|----------------------- |  | ----------- | ----- | ---- |  |  | ----- | -
|                        |  |            
|                        |  | Predecessor
|                        |  |            
|                        |  | 2001        |       | 2000
|                        |  |             |       |     
|Expected life of option |  |             | 5 yrs |      |  |  | 5 yrs |  
|Risk free interest rate |  |             | 4.56  | %    |  |  | 6.70  | %
|Expected volatility     |  |             | 81.60 | %    |  |  | 47.40 | %
|Expected dividend yield |  |             |      |      |  |  |      |  

F-29



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

No options were granted in the 2002 Successor and
Predecessor periods. The fair values of options granted during
2001 and 2000 are as follows:

|                                                           |  |                |   |              |  |      |   |      |  |   |      |     |  |   |       | 
|---------------------------------------------------------- |  | -------------- | - | ------------ |  | ---- | - | ---- |  | - | ---- | --- |  | - | ----- | 
|                                                           |  |                |   |             
|                                                           |  | Successor      |   | Predecessor 
|                                                           |  |                |   |             
|                                                           |  | November 23 to |   | January 1 to |  |     
|                                                           |  | December 31,   |   | November 22, |  |     
|                                                           |  | 2002           |   | 2002         |  | 2001 |   | 2000
|                                                           |  |                |   |              |  |      |   |     
|Weighted average fair value of options granted             |  | $              |  |              |  | $    |  |      |  | $ | 0.50 |     |  | $ | 1.70  | 
|Total number of options granted (in thousands)             |  |                |  |              |  |      |  |      |  |   | 55   | (1) |  |   | 60    | 
|Total fair value of all options granted (in
    thousands) |  | $              |  |              |  | $    |  |      |  | $ | 27.5 |     |  | $ | 102.0 | 



---

(1) Amount is net of forfeitures.

16.     Supplemental
Guarantor Information

In connection with the Companys sale of
Notes, certain of the Companys subsidiaries (the
Subsidiary Guarantors) had previously guaranteed the
Companys obligations to pay principal and interest with
respect to the Notes.

In connection with the Companys emergence
from Chapter 11, the Notes were exchanged for
4,690,600 shares of preferred stock and 5,557,511 shares of
common stock. As a result, the following supplemental
consolidating financial statements are not required for the
Successor period but are presented for the applicable
Predecessor periods.

Following are balance sheets as of
December 31, 2001 (Predecessor) and statements of
operations and cash flows for the Predecessor years ended
December 31, 2001 and 2000. In the consolidating financial
statements, Lodgian, Inc. (the Parent) accounts for
its investments in wholly-owned subsidiaries using the equity
method. Each Subsidiary Guarantor is wholly-owned (except for
Servico Center Associates LP) and management had determined that
separate financial statements for the Subsidiary Guarantors were
not material to investors. The subsidiaries of the Company that
are not Subsidiary Guarantors are referred to in this note as
the Non-Guarantor Subsidiaries.

F-30



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE
SHEETS

December 31, 2001


(Predecessor)


|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |          |        |  
|-------------------------------------------------- | ----------------------------------------- | ------------------------------------ | -------- | ---------- | ------ | ------------ | -------- | ------------- | -------- | ------------ | -------- | -------- | -------- | - | ------- | ------- | ------- | - | ------- | -------- | ------ | -
|                                                   |                                           |                                      |          |            |        | Subsidiary   |          | Non-Guarantor |          | Total       
|                                                   |                                           | Parent                               |          | Guarantors |        | Subsidiaries |          | Eliminations  |          | Consolidated
|                                                   |                                           |                                      |          |            |        |              |          |               |          |             
|                                                   |                                           |                                     
|                                                   |                                           | (In thousands)                      
|ASSETS                                            
|Current assets:                                    |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   | Cash and cash equivalents                 |                                      | $        | 6          |        |              | $        | 6,550         |          |              | $        | 7,451    |          |   | $       |        |         |   | $       | 14,007   |       
|                                                   | Cash, restricted                          |                                      |          |           |        |              |          |              |          |              |          | 3,218    |          |   |         |        |         |   |         | 3,218    |       
|                                                   | Accounts receivable, net of allowances    |                                      |          |           |        |              |          | 5,921         |          |              |          | 6,568    |          |   |         |        |         |   |         | 12,489   |       
|                                                   | Inventories                               |                                      |          |           |        |              |          | 3,320         |          |              |          | 3,903    |          |   |         |        |         |   |         | 7,223    |       
|                                                   | Prepaid expenses and other current assets |                                      |          |           |        |              |          | 143           |          |              |          | 6,141    |          |   |         |        |         |   |         | 6,284    |       
|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   |                                           | Total current assets                 |          |            | 6      |              |          |               | 15,934   |              |          |          | 27,281   |   |         |         |        |   |         |          | 43,221 |  
|Property and equipment, net                        |                                           |                                      |         |            |        |              | 532,163  |               |          |              | 381,805  |          |          |   |        |         |         |   | 913,968 |         
|Deposits for capital expenditures                  |                                           |                                      |         |            |        |              | 91       |               |          |              | 15,722   |          |          |   |        |         |         |   | 15,813  |         
|Investment in consolidated entities                |                                           |                                      | (361,752 | )          |        |              |         |               |          |              |         |          |          |   | 361,752 |         |         |   |        |         
|Due from (to) affiliates                           |                                           |                                      | 556,300  |            |        |              | (247,346 | )             |          |              | (308,954 | )        |          |   |        |         |         |   |        |         
|Other assets                                       |                                           |                                      |         |            |        |              | 1,122    |               |          |              | 1,238    |          |          |   |        |         |         |   | 2,360   |         
|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   |                                           | $                                    | 194,554  |            |        | $            | 301,964  |               |          | $            | 117,092  |          |          | $ | 361,752 |         |         | $ | 975,362 |         
|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    (DEFICIT) EQUITY
|Liabilities Not Subject to Compromise:             |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|Current liabilities:                               |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   | Accounts payable                          |                                      | $        |           |        |              | $        | 280           |          |              | $        | 2,426    |          |   | $       |        |         |   | $       | 2,706    |       
|                                                   | Accrued liabilities                       |                                      |          |           |        |              |          | 4,837         |          |              |          | 26,140   |          |   |         |        |         |   |         | 30,977   |       
|                                                   | Advance deposits                          |                                      |          |           |        |              |          | 896           |          |              |          | 875      |          |   |         |        |         |   |         | 1,771    |       
|                                                   | Current portion of long-term debt         |                                      |          |           |        |              |          |              |          |              |          | 7,717    |          |   |         |        |         |   |         | 7,717    |       
|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   |                                           | Total current liabilities            |          |            |       |              |          |               | 6,013    |              |          |          | 37,158   |   |         |         |        |   |         |          | 43,171 |  
|                                                   | Other long-term debt                      |                                      |          |           |        |              |          |              |          |              |          | 7,652    |          |   |         |        |         |   |         | 7,652    |       
|Liabilities subject to compromise                  |                                           |                                      | 199,256  |            |        |              | 428,528  |               |          |              | 298,110  |          |          |   |        |         |         |   | 925,894 |         
|Minority interests  other                         |                                           |                                      |         |            |        |              |         |               |          |              | 5,326    |          |          |   |        |         |         |   | 5,326   |         
|Commitments and contingencies                      |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|Stockholders (deficit) equity:                    |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   | Common stock                              |                                      |          | 284        |        |              |          | 33            |          |              |          | 448      |          |   |         | (481    | )       |   |         | 284      |       
|                                                   | Additional paid-in capital                |                                      |          | 263,320    |        |              |          | 22,619        |          |              |          | (46,924  | )        |   |         | 24,305  |         |   |         | 263,320  |       
|                                                   | Accumulated deficit                       |                                      |          | (268,306   | )      |              |          | (153,250      | )        |              |          | (184,678 | )        |   |         | 337,928 |         |   |         | (268,306 | )     
|                                                   | Accumulated other comprehensive loss      |                                      |          |           |        |              |          | (1,979        | )        |              |          |         |          |   |         |        |         |   |         | (1,979   | )     
|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   |                                           | Total stockholders (deficit) equity |          |            | (4,702 | )            |          |               | (132,577 | )            |          |          | (231,154 | ) |         |         | 361,752 |   |         |          | (6,681 | )
|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         
|                                                   |                                           | $                                    | 194,554  |            |        | $            | 301,964  |               |          | $            | 117,092  |          |          | $ | 361,752 |         |         | $ | 975,362 |         
|                                                   |                                           |                                      |          |            |        |              |          |               |          |              |          |          |          |   |         |         |         |   |         |         

F-31



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

Year Ended December 31, 2001


(Predecessor)


|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |         |        |         | 
|------------------------------------------------- | --------------------------------------------- | ----------------- | ------------------------ | ---------- | - | ------------ | ------- | ------------- | ------ | ------------ | -------- | ------- | ------ | ------- | ------- | ------- | - | - | -------- | ------- | ------ | ------- | 
|                                                  |                                               |                   |                          |            |   | Subsidiary   |         | Non-Guarantor |        | Total       
|                                                  |                                               | Parent            |                          | Guarantors |   | Subsidiaries |         | Eliminations  |        | Consolidated
|                                                  |                                               |                   |                          |            |   |              |         |               |        |             
|                                                  |                                               |                  
|                                                  |                                               | (In thousands)   
|Revenues:                                         |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  | Rooms                                         |                   | $                        |           |   |              | $       | 160,698       |        |              | $        | 168,154 |        |         | $       |        |   |   | $        | 328,852 |       
|                                                  | Food and beverage                             |                   |                          |           |   |              |         | 48,962        |        |              |          | 49,612  |        |         |         |        |   |   |          | 98,574  |       
|                                                  | Other                                         |                   |                          |           |   |              |         | 9,600         |        |              |          | 10,530  |        |         |         |        |   |   |          | 20,130  |       
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|Total revenue                                     |                                               |                   |                         |            |   |              | 219,260 |               |        |              | 228,296  |         |        |         |        |         |   |   | 447,556  |        
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|Operating expenses:                               |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  | Direct:                                       |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |         |       
|                                                  |                                               | Rooms             |                          |            |  |              |         |               | 44,645 |              |          |         | 46,770 |         |         |         |  |   |          |         | 91,415 |        
|                                                  |                                               | Food and beverage |                          |            |  |              |         |               | 35,114 |              |          |         | 35,551 |         |         |         |  |   |          |         | 70,665 |        
|                                                  |                                               | Other             |                          |            |  |              |         |               | 5,962  |              |          |         | 6,240  |         |         |         |  |   |          |         | 12,202 |        
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  |                                               |                   |                         |            |   |              | 85,721  |               |        |              | 88,561   |         |        |         |        |         |   |   | 174,282  |        
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  |                                               |                   | Gross Contribution       |            |   |             |         |               |        | 133,539      |          |         |        | 139,735 |         |         |   |  |          |         |        | 273,274 | 
|General, administrative and other                 |                                               |                   |                         |            |   |              | 84,585  |               |        |              | 110,250  |         |        |         |        |         |   |   | 194,835  |        
|Depreciation and amortization                     |                                               |                   |                         |            |   |              | 30,630  |               |        |              | 31,915   |         |        |         |        |         |   |   | 62,545   |        
|Impairment of long-lived assets                   |                                               |                   |                         |            |   |              | (5,022  | )             |        |              | 72,362   |         |        |         |        |         |   |   | 67,340   |        
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  |                                               |                   | Other operating expenses |            |   |             |         |               |        | 110,193      |          |         |        | 214,527 |         |         |   |  |          |         |        | 324,720 | 
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  |                                               |                   |                         |            |   |              | 23,346  |               |        |              | (74,792  | )       |        |         |        |         |   |   | (51,446  | )      
|Other income (expenses):                          |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  | Interest income and other                     |                   |                          |           |   |              |         |              |        |              |          | 709     |        |         |         |        |   |   |          | 709     |       
|                                                  | Interest expense                              |                   |                          |           |   |              |         | (48,089       | )      |              |          | (27,237 | )      |         |         |        |   |   |          | (75,326 | )     
|                                                  | (Loss) gain on asset dispositions             |                   |                          |           |   |              |         | (576          | )      |              |          | 24,551  |        |         |         |        |   |   |          | 23,975  |       
|                                                  | Equity in losses of consolidated subsidiaries |                   |                          | (139,935   | ) |              |         |              |        |              |          |        |        |         |         | 139,935 |   |   |          |        |       
|Minority interests:                               |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|                                                  | Preferred redeemable securities               |                   |                          |           |   |              |         |              |        |              |          | (12,869 | )      |         |         |        |   |   |          | (12,869 | )     
|                                                  | Other                                         |                   |                          |           |   |              |         | (152          | )      |              |          | 190     |        |         |         |        |   |   |          | 38      |       
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|Loss before income taxes and reorganization items |                                               |                   | (139,935                 | )          |   |              | (25,471 | )             |        |              | (89,448  | )       |        |         | 139,935 |         |   |   | (114,919 | )      
|Reorganization items                              |                                               |                   |                         |            |   |              | (13,143 | )             |        |              | (11,873  | )       |        |         |        |         |   |   | (25,016  | )      
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|Loss before income taxes                          |                                               |                   | (139,935                 | )          |   |              | (38,614 | )             |        |              | (101,321 | )       |        |         | 139,935 |         |   |   | (139,935 | )      
|Provision for income taxes                        |                                               |                   | (2,829                   | )          |   |              | (129    | )             |        |              | (2,700   | )       |        |         | 2,829   |         |   |   | (2,829   | )      
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        
|Net loss                                          |                                               | $                 | (142,764                 | )          |   | $            | (38,743 | )             |        | $            | (104,021 | )       |        | $       | 142,764 |         |   | $ | (142,764 | )      
|                                                  |                                               |                   |                          |            |   |              |         |               |        |              |          |         |        |         |         |         |   |   |          |        

F-32



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

Year Ended December 31, 2000


(Predecessor)


|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |         |         |         | 
|------------------------ | ------------------------------------------- | ------------------------ | ------------------ | ---------- | ------- | ------------- | ------- | ------------ | ------- | ------------ | ------- | ------- | ------- | ------- | ------- | ------- | ------ | - | -------- | ------- | ------- | ------- | 
|                         |                                             |                          |                    | Subsidiary |         | Non-Guarantor |         |              |         | Total       
|                         |                                             | Parent                   |                    | Guarantors |         | Subsidiaries  |         | Eliminations |         | Consolidated
|                         |                                             |                          |                    |            |         |               |         |              |         |             
|                         |                                             |                         
|                         |                                             | (In thousands)          
|Revenues:                |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         | Rooms                                       |                          | $                  |           |         |               | $       | 189,963      |         |              | $       | 232,512 |         |         | $       |        |        |   | $        | 422,475 |        
|                         | Food and beverage                           |                          |                    |           |         |               |         | 56,898       |         |              |         | 74,435  |         |         |         |        |        |   |          | 131,333 |        
|                         | Other                                       |                          |                    |           |         |               |         | 10,904       |         |              |         | 16,185  |         |         |         |        |        |   |          | 27,089  |        
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         |                                             |                          |                   |            |         |               | 257,765 |              |         |              | 323,132 |         |         |         |        |         |        |   | 580,897  |        
|Operating expenses:      |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         | Direct:                                     |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |         |        
|                         |                                             | Rooms                    |                    |            |        |               |         |              | 54,366  |              |         |         | 64,793  |         |         |         |       |   |          |         | 119,159 |        
|                         |                                             | Food and beverage        |                    |            |        |               |         |              | 41,175  |              |         |         | 53,775  |         |         |         |       |   |          |         | 94,950  |        
|                         |                                             | Other                    |                    |            |        |               |         |              | 7,634   |              |         |         | 9,195   |         |         |         |       |   |          |         | 16,829  |        
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         |                                             |                          |                   |            |         |               | 103,175 |              |         |              | 127,763 |         |         |         |        |         |        |   | 230,938  |        
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         |                                             |                          | Gross Contribution |            |         |              |         |              |         | 154,590      |         |         |         | 195,369 |         |         |        |  |          |         |         | 349,959 | 
|                         | General, administrative and other           |                          |                    |           |         |               |         | 93,223       |         |              |         | 131,511 |         |         |         |        |        |   |          | 224,734 |        
|                         | Depreciation and amortization               |                          |                    |           |         |               |         | 26,530       |         |              |         | 38,264  |         |         |         |        |        |   |          | 64,794  |        
|                         | Impairment of long-lived assets             |                          |                    |           |         |               |         | 3,576        |         |              |         | 57,112  |         |         |         |        |        |   |          | 60,688  |        
|                         | Write-off of goodwill                       |                          |                    |           |         |               |         |             |         |              |         |        |         |         |         |        |        |   |          |        |        
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         |                                             | Other operating expenses |                    |            |        |               |         |              | 123,329 |              |         |         | 226,887 |         |         |         |       |   |          |         | 350,216 |        
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         |                                             |                          |                   |            |         |               | 31,261  |              |         |              | (31,518 | )       |         |         |        |         |        |   | (257     | )      
|Other income (expenses): |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         | Interest income and other                   |                          |                    |           |         |               |         |             |         |              |         | 1,458   |         |         |         |        |        |   |          | 1,458   |        
|                         | Interest expense                            |                          |                    |           |         |               |         | (56,308      | )       |              |         | (40,998 | )       |         |         |        |        |   |          | (97,306 | )      
|                         | Interest hedge break fee                    |                          |                    |            |         |               |         |             |         |              |         | (4,294  | )       |         |         |        |        |   |          | (4,294  | )      
|                         | Acquisition termination fees                |                          |                    |           |         |               |         |             |         |              |         | (3,500  | )       |         |         |        |        |   |          | (3,500  | )      
|                         | Gain (loss) on asset dispositions           |                          |                    |           |         |               |         | 459          |         |              |         | (161    | )       |         |         |        |        |   |          | 298     |        
|                         | Equity in loss of consolidated subsidiaries |                          |                    | (116,678   | )       |               |         |             |         |              |         |        |         |         |         | 116,678 |        |   |          |        |        
|Minority interests:      |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         | Preferred redeemable securities             |                          |                    |           |         |               |         |             |         |              |         | (12,412 | )       |         |         |        |        |   |          | (12,412 | )      
|                         | Other                                       |                          |                    |           |         |               |         |             |         |              |         | (665    | )       |         |         |        |        |   |          | (665    | )      
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|Loss before income taxes |                                             |                          | (116,678           | )          |         |               | (24,588 | )            |         |              | (92,090 | )       |         |         | 116,678 |         |        |   | (116,678 | )      
|Benefit for income taxes |                                             |                          | 28,723             |            |         |               | 8,360   |              |         |              | 20,363  |         |         |         | (28,723 | )       |        |   | 28,723   |        
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        
|                         |                                             | Net loss                 |                    | $          | (87,955 | )             |         | $            | (16,228 | )            |         | $       | (71,727 | )       |         | $       | 87,955 |   |          | $       | (87,955 | )      
|                         |                                             |                          |                    |            |         |               |         |              |         |              |         |         |         |         |         |         |        |   |          |        

F-33



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

Year Ended December 31, 2001


(Predecessor)


|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |          |         |  
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------ | ---------- | ------ | ------------- | ------- | ------------ | ------ | - | ------- | -------- | ------- | - | ------ | -------- | ------- | -
|                                                         |                                                                                               | Parent and                                                  |        | Subsidiary |        | Non-Guarantor |         | Total       
|                                                         |                                                                                               | Eliminations                                                |        | Guarantors |        | Subsidiaries  |         | Consolidated
|                                                         |                                                                                               |                                                             |        |            |        |               |         |             
|                                                         |                                                                                               |                                                            
|                                                         |                                                                                               | (In thousands)                                             
|Operating activities:                                    |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|                                                         | Net loss                                                                                      |                                                             | $      |           |        |               | $       | (38,743      | )      |   | $       | (104,021 | )       |   | $      | (142,764 | )      
|                                                         | Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities: |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |          |        
|                                                         |                                                                                               | Depreciation and amortization                               |        |            |       |               |         |              | 30,630 |   |         |          | 31,915  |   |        |          | 62,545  |  
|                                                         |                                                                                               | Impairment of long-lived assets                             |        |            |       |               |         |              | (5,022 | ) |         |          | 72,362  |   |        |          | 67,340  |  
|                                                         |                                                                                               | Minority interests                                          |        |            | 12,831 |               |         |              | 152    |   |         |          | (152    | ) |        |          | 12,831  |  
|                                                         |                                                                                               | Loss (gain) on sale of assets                               |        |            |       |               |         |              | 576    |   |         |          | (24,551 | ) |        |          | (23,975 | )
|                                                         |                                                                                               | Write-offs and amortization of deferred financing
    costs |        |            | 5,052  |               |         |              | 15,804 |   |         |          | 5,417   |   |        |          | 26,273  |  
|                                                         |                                                                                               | Other                                                       |        |            | 40     |               |         |              | (3,214 | ) |         |          | 3,737   |   |        |          | 563     |  
|                                                         | Changes in operating assets and liabilities:                                                  |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |          |        
|                                                         |                                                                                               | Accounts receivable                                         |        |            |       |               |         |              | 2,110  |   |         |          | 6,025   |   |        |          | 8,135   |  
|                                                         |                                                                                               | Inventories                                                 |        |            |       |               |         |              | 289    |   |         |          | 293     |   |        |          | 582     |  
|                                                         |                                                                                               | Prepaid expenses and other assets                           |        |            |       |               |         |              | (33    | ) |         |          | (1,574  | ) |        |          | (1,607  | )
|                                                         |                                                                                               | Accounts payable                                            |        |            |       |               |         |              | 3,824  |   |         |          | (1,547  | ) |        |          | 2,277   |  
|                                                         |                                                                                               | Accrued liabilities                                         |        |            |       |               |         |              | (1,682 | ) |         |          | (1,136  | ) |        |          | (2,818  | )
|                                                         |                                                                                               | Advance deposits                                            |        |            |       |               |         |              | 41     |   |         |          | (124    | ) |        |          | (83     | )
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|Net cash provided by (used in) operating
    activities  |                                                                                               |                                                             | 17,923 |            |        |               | 4,732   |              |        |   | (13,356 | )        |         |   | 9,299  |         
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|Investing activities:                                    |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|                                                         | Capital improvements, net                                                                     |                                                             |        |           |        |               |         | (13,999      | )      |   |         | (14,845  | )       |   |        | (28,844  | )      
|                                                         | Proceeds from sale of assets, net                                                             |                                                             |        |           |        |               |         | 12,181       |        |   |         | 55,729   |         |   |        | 67,910   |        
|                                                         | Net withdrawals (deposits) for capital
    expenditures                                       |                                                             |        |           |        |               |         | 826          |        |   |         | (2,634   | )       |   |        | (1,808   | )      
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|                                                         | Net cash (used in) provided by investing
    activities                                       |                                                             |        |           |        |               |         | (992         | )      |   |         | 38,250   |         |   |        | 37,258   |        
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|Financing activities:                                    |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|                                                         | Proceeds from borrowings on working capital
    revolver                                      |                                                             |        |           |        |               |         | 21,000       |        |   |         |         |         |   |        | 21,000   |        
|                                                         | Proceeds (paid to) received from related parties                                              |                                                             |        | (17,923    | )      |               |         | 7,181        |        |   |         | 10,742   |         |   |        |         |        
|                                                         | Principal payments on long-term obligations                                                   |                                                             |        |           |        |               |         | (30,426      | )      |   |         | (28,528  | )       |   |        | (58,954  | )      
|                                                         | Principal payments on working capital revolver                                                |                                                             |        |           |        |               |         | (15,000      | )      |   |         |         |         |   |        | (15,000  | )      
|                                                         | Payments of deferred loan costs                                                               |                                                             |        |           |        |               |         | (598         | )      |   |         |         |         |   |        | (598     | )      
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|                                                         | Net cash used in financing activities                                                         |                                                             |        | (17,923    | )      |               |         | (17,843      | )      |   |         | (17,786  | )       |   |        | (53,552  | )      
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|Net (decrease) increase in cash and cash
    equivalents |                                                                                               |                                                             |       |            |        |               | (14,103 | )            |        |   | 7,108   |          |         |   | (6,995 | )       
|Cash and cash equivalents at beginning of period         |                                                                                               |                                                             | 6      |            |        |               | 20,653  |              |        |   | 343     |          |         |   | 21,002 |         
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         
|Cash and cash equivalents at end of period               |                                                                                               | $                                                           | 6      |            |        | $             | 6,550   |              |        | $ | 7,451   |          |         | $ | 14,007 |         
|                                                         |                                                                                               |                                                             |        |            |        |               |         |              |        |   |         |          |         |   |        |         

F-34



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

Year Ended December 31, 2000


(Predecessor)


|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |          |         |        |          |  
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------- | ------------------------------------------------------- | ------- | ------------- | ------- | ------------ | ------ | ------ | ------- | -------- | ------ | ------ | -------- | -------- | ------- | ------ | -------- | -
|                                                         |                                                                                               | Parent and                                  |                           | Subsidiary                                              |         | Non-Guarantor |         | Total       
|                                                         |                                                                                               | Eliminations                                |                           | Guarantors                                              |         | Subsidiaries  |         | Consolidated
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |             
|                                                         |                                                                                               |                                            
|                                                         |                                                                                               | (In thousands)                             
|Operating activities:                                    |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|                                                         | Net loss                                                                                      |                                             | $                         |                                                        |         |               | $       | (16,228      | )      |        | $       | (71,727  | )      |        | $        | (87,955  | )      
|                                                         | Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities: |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |          |        
|                                                         |                                                                                               | Depreciation and amortization               |                           |                                                         |        |               |         |              | 26,530 |        |         |          | 38,264 |        |          |          | 64,794  |       
|                                                         |                                                                                               | Impairment of long-lived assets             |                           |                                                         |        |               |         |              | 3,576  |        |         |          | 57,112 |        |          |          | 60,688  |       
|                                                         |                                                                                               | Deferred income tax benefits                |                           |                                                         | (30,063 | )             |         |              |       |        |         |          |       |        |          |          | (30,063 | )     
|                                                         |                                                                                               | Minority interests  other                  |                           |                                                         |        |               |         |              |       |        |         |          | 10,014 |        |          |          | 10,014  |       
|                                                         |                                                                                               | (Gain) loss on sale of assets               |                           |                                                         |        |               |         |              | (459   | )      |         |          | 161    |        |          |          | (298    | )     
|                                                         |                                                                                               | Amortization of deferred loan fees          |                           |                                                         |        |               |         |              | 3,272  |        |         |          | 2,382  |        |          |          | 5,654   |       
|                                                         |                                                                                               | Other                                       |                           |                                                         | 934     |               |         |              | (403   | )      |         |          | (3,574 | )      |          |          | (3,043  | )     
|                                                         |                                                                                               | Changes in operating assets and liabilities |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |          |         |       
|                                                         |                                                                                               |                                             | Accounts receivable       |                                                         |         |              |         |              |        | 226    |         |          |        | 5,670  |          |          |         | 5,896  |         
|                                                         |                                                                                               |                                             | Inventories               |                                                         |         |              |         |              |        | 507    |         |          |        | 878    |          |          |         | 1,385  |         
|                                                         |                                                                                               |                                             | Prepaids and other assets |                                                         |         | (496          | )       |              |        | (46    | )       |          |        | 1,555  |          |          |         | 1,013  |         
|                                                         |                                                                                               |                                             | Accounts payable          |                                                         |         |              |         |              |        | (2,182 | )       |          |        | (1,317 | )        |          |         | (3,499 | )       
|                                                         |                                                                                               |                                             | Accrued liabilities       |                                                         |         |              |         |              |        | 6,303  |         |          |        | (8,007 | )        |          |         | (1,704 | )       
|                                                         |                                                                                               |                                             | Advance deposits          |                                                         |         |              |         |              |        | (233   | )       |          |        | (297   | )        |          |         | (530   | )       
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|                                                         |                                                                                               |                                             |                           | Net cash (used in) provided by operating
    activities |         |               | (29,625 | )            |        |        | 20,863  |          |        |        | 31,114   |          |         |        | 22,352   |  
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|Investing activities:                                    |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|                                                         | Capital improvements, net                                                                     |                                             |                           |                                                        |         |               |         | (50,123      | )      |        |         | (28,593  | )      |        |          | (78,716  | )      
|                                                         | Proceeds from sale of assets and withdrawals
    (deposits) for capital expenditures          |                                             |                           |                                                        |         |               |         | 74,814       |        |        |         | 128,525  |        |        |          | 203,339  |        
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|                                                         |                                                                                               |                                             |                           | Net cash provided by investing activities               |         |               |        |              |        |        | 24,691  |          |        |        | 99,932   |          |         |        | 124,623  |  
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|Financing activities:                                    |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|                                                         | Proceeds from issuance of long-term obligations                                               |                                             |                           |                                                        |         |               |         | 30,000       |        |        |         | 2,326    |        |        |          | 32,326   |        
|                                                         | Proceeds received from (paid to) related parties                                              |                                             |                           | 29,572                                                  |         |               |         | (14,653      | )      |        |         | (14,919  | )      |        |          |         |        
|                                                         | Principal payments of long-term obligations                                                   |                                             |                           |                                                        |         |               |         | (48,758      | )      |        |         | (120,110 | )      |        |          | (168,868 | )      
|                                                         | Payments of deferred loan costs                                                               |                                             |                           |                                                        |         |               |         | (1,400       | )      |        |         | (1,900   | )      |        |          | (3,300   | )      
|                                                         | Distributions to minority interests                                                           |                                             |                           |                                                        |         |               |         |             |        |        |         | (775     | )      |        |          | (775     | )      
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|                                                         |                                                                                               |                                             |                           | Net cash provided by (used in) financing
    Activities |         |               | 29,572  |              |        |        | (34,811 | )        |        |        | (135,378 | )        |         |        | (140,617 | )
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|Net (decrease) increase in cash and cash
    equivalents |                                                                                               |                                             | (53                       | )                                                       |         |               | 10,743  |              |        |        | (4,332  | )        |        |        | 6,358    |         
|Cash and cash equivalents at beginning of period         |                                                                                               |                                             | 59                        |                                                         |         |               | 9,910   |              |        |        | 4,675   |          |        |        | 14,644   |         
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         
|Cash and cash equivalents at end of period               |                                                                                               | $                                           | 6                         |                                                         |         | $             | 20,653  |              |        | $      | 343     |          |        | $      | 21,002   |         
|                                                         |                                                                                               |                                             |                           |                                                         |         |               |         |              |        |        |         |          |        |        |          |         

F-35



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##### Table of Contents



17.     Selected
Quarterly Financial Data, Unaudited

The following table summarizes unaudited
quarterly financial data:

|                                                   |  |                                   |         |           |  |         |         |                   |  |                   |         |   |  |  |        |  |  |  |         |  
|-------------------------------------------------- |  | --------------------------------- | ------- | --------- |  | ------- | ------- | ----------------- |  | ----------------- | ------- | - |  |  | ------ |  |  |  | ------- | -
|                                                   |  |                                   |         |          
|                                                   |  | Predecessor                       |         | Successor
|                                                   |  |                                   |         |          
|                                                   |  | First                             |         | Second    |  | Third   |         | October 1 to      |  | November 23 to   
|                                                   |  | Quarter                           |         | Quarter   |  | Quarter |         | November 22, 2002 |  | December 31, 2002
|                                                   |  |                                   |         |           |  |         |         |                   |  |                  
|                                                   |  |                                  
|                                                   |  | (In thousands, except share data)
|Year Ended December 31, 2002                       |  |                                   |         |           |  |         |         |                   |  |                   |         |   |  |  |        |  |  |  |         |  
|Revenues                                           |  |                                   | 94,362  |           |  |         | 113,704 |                   |  |                   | 107,345 |   |  |  | 62,613 |  |  |  | 31,747  |  
|Operating expenses                                 |  |                                   | 94,042  |           |  |         | 102,424 |                   |  |                   | 100,354 |   |  |  | 58,521 |  |  |  | 38,507  |  
|Income (loss) before income taxes                  |  |                                   | (14,355 | )         |  |         | (880    | )                 |  |                   | (4,481  | ) |  |  | 30,722 |  |  |  | (9,294  | )
|Net (loss) income attributable to common stock     |  |                                   | (14,355 | )         |  |         | 3,463   |                   |  |                   | (4,557  | ) |  |  | 27,815 |  |  |  | (10,836 | )
|Basic and diluted (loss) earnings per common share |  |                                   | (0.51   | )         |  |         | 0.12    |                   |  |                   | (0.16   | ) |  |  | 0.98   |  |  |  | (1.55   | )

|                                                   |  |                                   |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|-------------------------------------------------- |  | --------------------------------- | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- | - |  | - | -------- | -
|                                                   |  |                                  
|                                                   |  | Predecessor                      
|                                                   |  |                                  
|                                                   |  | First                             |         | Second  |  | Third   |         | Fourth 
|                                                   |  | Quarter                           |         | Quarter |  | Quarter |         | Quarter
|                                                   |  |                                   |         |         |  |         |         |        
|                                                   |  |                                  
|                                                   |  | (In thousands, except share data)
|Year Ended December 31, 2001                       |  |                                   |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|Revenues                                           |  | $                                 | 114,773 |         |  | $       | 125,897 |         |  | $ | 111,374 |   |  | $ | 95,512   |  
|Operating expenses(1)                              |  |                                   | 114,427 |         |  |         | 115,796 |         |  |   | 107,964 |   |  |   | 160,815  |  
|Income (loss) before income taxes                  |  |                                   | 844     |         |  |         | (11,802 | )       |  |   | (18,204 | ) |  |   | (110,773 | )
|Net loss attributable to common stock              |  |                                   | (1,856  | )       |  |         | (11,802 | )       |  |   | (18,333 | ) |  |   | (110,773 | )
|Basic and diluted (loss) earnings per common share |  |                                   | (0.07   | )       |  |         | (0.42   | )       |  |   | (0.64   | ) |  |   | (3.91    | )



---



|    |                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Operating expenses include impairment of
    long-lived asset charges of (in thousands) $565, $4,000, $2,270
    and $60,505, in the first, second, third and fourth quarters,
    respectively.

F-36



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##### Table of Contents



INDEX TO EXHIBITS

|        |        |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ------ |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  |  |            
|No.     |        |  |  | Description
|        |        |  |  |            
|        | 1.1    |  |  |            |  | Purchase Agreement, dated June 9, 1998, by
    Lodgian Capital Trust I and NationsBanc Montgomery Securities
    LLC.(h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 2.1    |  |  |            |  | Amended and Restated Agreement and Plan of Merger
    (the Merger Agreement) among Lodgian, Inc., Servico,
    Inc., Impac Hotel Group, L.L.C., SHG-S Sub, Inc., SHG-I
    Sub,L.L.C., P-Burg Lodging Associates, Inc., SHG-II Sub, Inc.,
    Hazard Lodging Associates, Inc., SHG-III Sub, Inc., Memphis
    Lodging Associates, Inc., SHG-IV Sub, Inc., Delk Lodging
    Associates, Inc., SHG-V Sub, Inc., Impac Hotel Development,
    Inc., SHG-VI Sun, Inc., Impac Design and Construction, Inc.,
    SHG-VII Sub, Inc., Impac Hotel Group, Inc., and SHG-VIII Sub,
    Inc., as of July 22, 1998.(a)
|        | 2.2    |  |  |            |  | Amendment to the Merger Agreement, dated as of
    September 16, 1998.(j)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.1.1  |  |  |            |  | Restated Certificate of Incorporation of Lodgian,
    Inc.(a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 3.1.2  |  |  |            |  | Amended Restated Bylaws of Lodgian, Inc.(e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 3.2.1  |  |  |            |  | Certificate of Incorporation of Lodgian Financing
    Corp.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 3.2.2  |  |  |            |  | Bylaws of Lodgian Financing Corp.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 3.3.1  |  |  |            |  | Amended and Restated Articles of Incorporation of
    Dothan Hospitality 3053, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.3.2  |  |  |            |  | Bylaws of Dothan Hospitality 3053, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3.4.1  |  |  |            |  | Amended and Restated Articles of Incorporation of
    Dothan Hospitality 3071, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.4.2  |  |  |            |  | Bylaws of Dothan Hospitality 3071, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3.5.1  |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Gadsden Hospitality, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.5.2  |  |  |            |  | Bylaws of Gadsden Hospitality, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.6.1  |  |  |            |  | Fourth Amended and Restated Articles of
    Incorporation of Sheffield Motel Enterprises, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.6.2  |  |  |            |  | Bylaws of Sheffield Motel Enterprises, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 3.7.1  |  |  |            |  | Articles of Incorporation of Lodgian Anaheim,
    Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.7.2  |  |  |            |  | Bylaws of Lodgian Anaheim, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 3.8.1  |  |  |            |  | Articles of Incorporation of Lodgian Ontario
    Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 3.8.2  |  |  |            |  | Bylaws of Lodgian Ontario Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.9.1  |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Ft. Pierce, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.9.2  |  |  |            |  | Bylaws of Servico Ft. Pierce, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 3.10.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Pensacola 7200, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 3.10.2 |  |  |            |  | Bylaws of Servico Pensacola 7200, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.11.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Pensacola 7330, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 3.11.2 |  |  |            |  | Bylaws of Servico Pensacola 7330, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.12.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Pensacola, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3.12.2 |  |  |            |  | Bylaws of Servico Pensacola, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 3.13.1 |  |  |            |  | Partnership Agreement of AMI Operating Partners,
    L.P., as amended.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.14.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Albany Hotel, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 3.14.2 |  |  |            |  | Bylaws of Albany Hotel, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 3.15.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Flagstaff, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3.15.2 |  |  |            |  | Bylaws of Servico Flagstaff, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 3.16.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Northwoods, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.16.2 |  |  |            |  | Bylaws of Servico Northwoods, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 3.17.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Servico Silver Spring, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 3.17.2 |  |  |            |  | Bylaws of Servico Silver Spring, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

1



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##### Table of Contents



|        |        |  |  |             |  |                                                                                               
|------- | ------ |  |  | ----------- |  | ----------------------------------------------------------------------------------------------
|Exhibit |        |  |  |            
|No.     |        |  |  | Description
|        |        |  |  |            
|        | 3.18.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Servico West Palm Beach, Inc.(f) 
|        | 3.18.2 |  |  |            |  | Bylaws of Servico West Palm Beach, Inc.(f)                                                    
|        | 3.19.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Windsor, Inc.(f)                
|        | 3.19.2 |  |  |            |  | Bylaws of Servico Windsor, Inc.(f)                                                            
|        | 3.20.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Winter Haven, Inc.(f)           
|        | 3.20.2 |  |  |            |  | Bylaws of Servico Winter Haven, Inc.(f)                                                       
|        | 3.21.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Brunswick Motel Enterprises, Inc.(f)    
|        | 3.21.2 |  |  |            |  | Bylaws of Brunswick Motel Enterprises, Inc.(f)                                                
|        | 3.22.1 |  |  |            |  | Operating Agreement of Atlanta-Hillsboro Lodging,
    LLC(f)                                  
|        | 3.23.1 |  |  |            |  | Operating Agreement of Lodgian Richmond, LLC(f)                                               
|        | 3.24.1 |  |  |            |  | Partnership Agreement of Little Rock Lodging
    Associates I, L.P.(f)                        
|        | 3.25.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Cedar Rapids, Inc.(f)           
|        | 3.25.2 |  |  |            |  | Bylaws of Servico Cedar Rapids, Inc.(f)                                                       
|        | 3.26.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Rolling Meadows, Inc.(f)        
|        | 3.26.2 |  |  |            |  | Bylaws of Servico Rolling Meadows, Inc.(f)                                                    
|        | 3.27.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Servico Metairie, Inc.(f)        
|        | 3.27.2 |  |  |            |  | Bylaws of Servico Metairie, Inc.(f)                                                           
|        | 3.28.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Colesville, Inc.(f)             
|        | 3.28.2 |  |  |            |  | Bylaws of Servico Colesvilles, Inc.(f)                                                        
|        | 3.29.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Columbia, Inc.(f)               
|        | 3.29.2 |  |  |            |  | Bylaws of Servico Columbia, Inc.(f)                                                           
|        | 3.30.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Maryland, Inc.(f)               
|        | 3.30.2 |  |  |            |  | Bylaws of Servico Maryland, Inc.(f)                                                           
|        | 3.31.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    NH Motel Enterprises, Inc.(f)           
|        | 3.31.2 |  |  |            |  | Bylaws of NH Motel Enterprises, Inc. (formerly
    RRCHR, Inc.)(f)                            
|        | 3.32.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Minneapolis Motel Enterprises, Inc.(f)  
|        | 3.32.2 |  |  |            |  | Bylaws of Minneapolis Enterprises, Inc.(f)                                                    
|        | 3.33.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Roseville, Inc.(f)              
|        | 3.33.2 |  |  |            |  | Bylaws of Servico Roseville, Inc.(f)                                                          
|        | 3.34.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Lodgian Mount Laurel, Inc.(f)           
|        | 3.34.2 |  |  |            |  | Bylaws of Lodgian Mount Laurel, Inc.(f)                                                       
|        | 3.35.1 |  |  |            |  | Restated Certificate of Incorporation of Servico
    Grand Island, Inc.(f)                    
|        | 3.35.2 |  |  |            |  | Bylaws of Servico Grand Island, Inc.(f)                                                       
|        | 3.36.1 |  |  |            |  | Restated Certificate of Incorporation of Servico
    Jamestown, Inc.(f)                       
|        | 3.36.2 |  |  |            |  | Bylaws of Servico Jamestown, Inc.(f)                                                          
|        | 3.37.1 |  |  |            |  | Restated Certificate of Incorporation of Servico
    New York, Inc.(f)                        
|        | 3.37.2 |  |  |            |  | Bylaws of Servico New York, Inc.(f)                                                           
|        | 3.38.1 |  |  |            |  | Restated Certificate of Incorporation of Servico
    Niagara Falls, Inc.(f)                   
|        | 3.38.2 |  |  |            |  | Bylaws of Servico Niagara Falls, Inc.(f)                                                      
|        | 3.39.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Fayetteville Motel Enterprises, Inc.(f) 
|        | 3.39.2 |  |  |            |  | Bylaws of Fayetteville Motel Enterprises, Inc.(f)                                             
|        | 3.40.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Apico Hills, Inc.(f)             
|        | 3.40.2 |  |  |            |  | Bylaws of Apico Inns of Green Tree, Inc.(f)                                                   
|        | 3.41.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Apico Inns of Green Tree, Inc.(f)

2



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##### Table of Contents



|        |        |  |  |             |  |                                                                                                                                                                                                                                                                                                                                     
|------- | ------ |  |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  |  |            
|No.     |        |  |  | Description
|        |        |  |  |            
|        | 3.41.2 |  |  |            |  | Bylaws of Apico Hills, Inc.(f)                                                                                                                                                                                                                                                                                                      
|        | 3.42.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Servico Hilton Head, Inc.(f)                                                                                                                                                                                                                                           
|        | 3.42.2 |  |  |            |  | Bylaws of Servico Hilton Head, Inc.(f)                                                                                                                                                                                                                                                                                              
|        | 3.43.1 |  |  |            |  | Amended and Restated Articles of Incorporation of
    Servico Austin, Inc.(f)                                                                                                                                                                                                                                                       
|        | 3.43.2 |  |  |            |  | Bylaws of Servico Austin, Inc.(f)                                                                                                                                                                                                                                                                                                   
|        | 3.44.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Servico Houston, Inc.(f)                                                                                                                                                                                                                                               
|        | 3.44.2 |  |  |            |  | Bylaws of Servico Houston, Inc.(f)                                                                                                                                                                                                                                                                                                  
|        | 3.45.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Servico Market Center, Inc.(f)                                                                                                                                                                                                                                         
|        | 3.45.2 |  |  |            |  | Bylaws of Servico Market Center, Inc.(f)                                                                                                                                                                                                                                                                                            
|        | 3.46.1 |  |  |            |  | Second Amended and Restated Articles of
    Incorporation of Palm Beach Motel Enterprises, Inc.(f)                                                                                                                                                                                                                                  
|        | 3.46.2 |  |  |            |  | Bylaws of Palm Beach Motel Enterprises, Inc.(f)                                                                                                                                                                                                                                                                                     
|        | 4.1.1  |  |  |            |  | Indenture, dated as of July 23, 1999, by and
    among Lodgian Financing Corp., Lodgian, Inc., the subsidiary
    guarantors named therein and Bankers Trust Company, as
    Trustee.(f)                                                                                                                                            
|        | 4.1.2  |  |  |            |  | First Supplemental Indenture, dated as of
    September 13, 1999, among Lodgian Financing Corp., Lodgian,
    Inc., the subsidiary guarantors named therein, the subsidiary of
    the Company listed on Schedule A annexed thereto and
    Bankers Trust Company, as Trustee.(m)                                                   
|        | 4.2    |  |  |            |  | Indenture, dated as of June 17, 1998,
    between Servico, Inc., Lodgian, Inc., and Wilmington Trust
    Company, as Trustee.(a)                                                                                                                                                                                                    
|        | 4.3    |  |  |            |  | First Supplemental Indenture, dated as of
    June 17, 1998, between Servico, Inc., Lodgian, Inc., and
    Wilmington Trust Company, as Trustee.(a)                                                                                                                                                                                 
|        | 4.4    |  |  |            |  | Registration Rights Agreement, dated as of
    June 17, 1998, among Lodgian Capital Trust I, Servico,
    Inc., and NationsBanc Montgomery Securities, LLC.(a)                                                                                                                                                                      
|        | 4.5    |  |  |            |  | Registration and Rights Agreement between
    Lodgian, Inc. and certain unitholders of Impac Hotel Group,
    LLC.(a)                                                                                                                                                                                                               
|        | 4.6    |  |  |            |  | Specimen Note.(f)                                                                                                                                                                                                                                                                                                                   
|        | 4.7    |  |  |            |  | Specimen CRESTS.(a)                                                                                                                                                                                                                                                                                                                 
|        | 4.8    |  |  |            |  | Specimen Convertible Debenture.(a)                                                                                                                                                                                                                                                                                                  
|        | 10.1   |  |  |            |  | Lodgian 1998 Short-Term, Incentive Compensation
    Plan.(a)                                                                                                                                                                                                                                                                        
|        | 10.2   |  |  |            |  | Lodgian 1998 Stock Incentive Plan.(a)                                                                                                                                                                                                                                                                                               
|        | 10.3   |  |  |            |  | Lodgian Non-Employee Directors Stock
    Plan.(a)                                                                                                                                                                                                                                                                                  
|        | 10.4   |  |  |            |  | Guarantee Agreement, dated as of June 17,
    1998, between Servico, Inc., Lodgian, Inc., and Wilmington Trust
    Company, as Guarantee Trustee(a)                                                                                                                                                                                 
|        | 10.5   |  |  |            |  | Guarantee Trustee.(a) Amended and Restated
    Declaration of Trust of Lodgian Capital Trust I, dated as of
    June 17, 1998 between Servico, Inc., as Sponsor, David A.
    Buddemeyer, Charles M. Diaz and Phillip R. Hale, as Regular
    Trustees, and Wilmington Trust Company, as Delaware Trust and
    Property Trustee.(a)
|        | 10.6   |  |  |            |  | Severance Agreement, dated November 10,
    1998, between Servico, Inc., and David Buddemeyer.(g)                                                                                                                                                                                                                                   
|        | 10.7   |  |  |            |  | Severance Agreement, dated February 28,
    1999, between Lodgian, Inc. and Warren M. Knight.(g)                                                                                                                                                                                                                                    
|        | 10.8   |  |  |            |  | Employment Agreement between Lodgian, Inc. and
    Robert S. Cole.(a)                                                                                                                                                                                                                                                               
|        | 10.9   |  |  |            |  | Employment Agreement, dated May 2, 1997,
    between Karyn Marasco and Servico, Inc.(i)                                                                                                                                                                                                                                             
|        | 10.10  |  |  |            |  | Form of Employment Agreement, dated as of
    February 9, 2001 between the Lodgian, Inc. and Thomas
    Arasi.(m)                                                                                                                                                                                                                   
|        | 10.11  |  |  |            |  | Form of Separation Agreement, dated as of
    February 9, 2001 between Lodgian, Inc. and Robert S.
    Cole.(m)                                                                                                                                                                                                                     

3



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##### Table of Contents



|        |         |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ------- |  |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |  |  |            
|No.     |         |  |  | Description
|        |         |  |  |            
|        | 10.13   |  |  |            |  | Voting Agreement, dated as of March 20,
    1998, between Servico, Inc., and Certain Members of Impac.(c)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.14   |  |  |            |  | Voting Agreement, dated as of March 20,
    1998, between Servico, Inc., and Certain Other Members of
    Impac.(c)                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10.15   |  |  |            |  | Credit Agreement, dated as of July 23, 1999,
    among Lodgian Financing Corp., Lodgian, Inc., Impac Hotel Group,
    LLC, Servico, Inc., and other affiliate guarantors party thereto
    and the initial lenders and initial issuing bank named therein
    and Morgan Stanley Senior Funding, Inc., as Administrative Agent
    and Collateral Agent, and Morgan Stanley Senior Funding, Inc.,
    as Co-Lead Arranger and Joint-Book Manager and Syndication
    Agent, and Lehman Brothers, Inc., as Co-Lead Arranger and
    Joint-Book Manager.(f)
|        | 10.16   |  |  |            |  | Security Agreement, dated July 23, 1999,
    from Lodgian Financing Corp., Servico, Inc., Impac Hotel Group,
    LLC, and the other grantors referred to therein to Morgan
    Stanley Senior Funding, Inc., as Collateral Agent.(f)                                                                                                                                                                                                                                                                                                                     
|        | 10.17.1 |  |  |            |  | Loan Agreement, dated December 8, 1998,
    Sheraton Concord, Inc., and Banc One Capital Funding
    Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.17.2 |  |  |            |  | Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Lodgian AMI, Inc., Penmoco, Inc., and
    Island Motel Enterprises, Inc., in favor of Banc One Capital
    Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                      
|        | 10.17.3 |  |  |            |  | Limited Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Lodgian, Inc., in favor of Banc One
    Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.18.1 |  |  |            |  | Loan Agreement, dated December 8, 1998,
    between Island Motel Enterprises, Inc., Penmoco, Inc., and Banc
    One Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10.18.2 |  |  |            |  | Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Servico Concord, Inc., and Lodgian
    AMI, Inc., in favor of Banc One Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10.18.3 |  |  |            |  | Limited Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Lodgian, Inc., in favor of Banc One
    Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.19.1 |  |  |            |  | Loan Agreement, dated December 8, 1998,
    between Lodgian AMI, Inc., and Banc One Capital Funding
    Corporation (relating to Holiday InnLancaster East).(f)                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.19.2 |  |  |            |  | Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Servico Concord, Inc., Penmoco Inc.,
    and Island Motel Enterprises, Inc., in favor of Banc One Capital
    Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                   
|        | 10.19.3 |  |  |            |  | Limited Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Lodgian, Inc., in favor of Banc One
    Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.20.1 |  |  |            |  | Loan Agreement, dated December 8, 1998,
    between Lodgian AMI, Inc., and Banc One Capital Funding
    Corporation (relating to Holiday InnInternational
    Airport).(f)                                                                                                                                                                                                                                                                                                                                                                              
|        | 10.20.2 |  |  |            |  | Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Servico Concord, Inc., Penmoco Inc.,
    and Island Motel Enterprises, Inc., in favor of Banc One Capital
    Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                   
|        | 10.20.3 |  |  |            |  | Limited Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Lodgian, Inc., in favor of Banc One
    Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.21.1 |  |  |            |  | Loan Agreement dated as of July 18, 1996,
    among GMAC Commercial Mortgage Corporation and Servico Council
    Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha,
    Inc., Servico Omaha Central, Inc., and Servico Wichita, Inc.(f)                                                                                                                                                                                                                                                                                                         
|        | 10.21.2 |  |  |            |  | Mortgage Note in the amount of
    $16.84 million, dated as of July 18, 1996, by Servico
    Council Bluffs, Inc., Servico West Des Moines, Inc., Servico
    Omaha, Inc., Servico Omaha Central, Inc., and Servico Wichita,
    Inc., in favor of GMAC Commercial Mortgage Corporation.(f)                                                                                                                                                                                                                                                              
|        | 10.22.1 |  |  |            |  | Loan Agreement dated as of May 7, 1996,
    between GMAC Commercial Mortgage Corporation and Servico
    Lansing, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.22.2 |  |  |            |  | Mortgage Note in the original amount of
    $5.687 million, dated as of May 7, 1996, by Servico
    Lansing, Inc., in favor of GMAC Commercial Mortgage
    Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                              

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|        |         |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ------- |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |  |  |            
|No.     |         |  |  | Description
|        |         |  |  |            
|        | 10.23.1 |  |  |            |  | Loan Agreement dated as of January 17, 1996,
    among Loan Services,Inc., and Brecksville Hospitality, L.P.,
    Sioux City Hospitality, L.P., and 1075 Hospitality, L.P.(f)                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10.23.2 |  |  |            |  | Mortgage Note in original amount of
    $12.91 million by Brecksville Hospitality, L.P., Sioux City
    Hospitality, L.P., and 1075 Hospitality, L.P., in favor of GMAC
    Commercial Mortgage Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10.24.1 |  |  |            |  | Loan Agreement dated as of January 31, 1995,
    by and among Column Financial, Inc., and Servico Fort Wayne,
    Inc., Washington Motel Enterprises, Inc., Servico Hotels I,
    Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico
    Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd.,
    Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and Moon
    Airport Hotel Inc.(f)                                                                                                                                                                                  
|        | 10.24.2 |  |  |            |  | Promissory Note in original amount of
    $60.5 million, dated as of January 31, 1995, by
    Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc.,
    Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels
    III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels
    Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises,
    Inc., and Moon Airport Hotel Inc., in favor of Column Financial,
    Inc.(f)                                                                                                                                          
|        | 10.25.1 |  |  |            |  | Loan Agreement dated as of June 29, 1995,
    between Column Financial, Inc., and East Washington Hospitality
    Limited Partnership.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10.25.2 |  |  |            |  | Promissory Note in original amount of
    $11.0 million, dated as of June 29, 1995, by East
    Washington Hospitality Limited Partnership in favor Column
    Financial, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.26.1 |  |  |            |  | Loan Agreement, dated as of January 31, 1995
    and amended as of June 29, 1995, between Column Financial,
    Inc., and McKnight Motel, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.26.2 |  |  |            |  | Promissory Note in original amount of
    $3.9 million, dated as of January 31, 1995 and amended
    as of June 29, 1995, by McKnight Motel, Inc., in favor of
    Column Financial, Inc.(f)                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.27.1 |  |  |            |  | Loan Agreement, dated December 8, 1998,
    between Lodgian AMI, Inc., and Banc One Capital Funding
    Corporation (relating to Holiday Inn  Glen Burnie).(f)                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10.27.2 |  |  |            |  | Guaranty and Indemnity Agreement, dated
    December 8, 1998 by Servico Concord, Inc., Penmoco Inc.,
    and Island Motel Enterprises, Inc., in favor of Banc One Capital
    Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                            
|        | 10.27.3 |  |  |            |  | Limited Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Lodgian, Inc., in favor of Banc One
    Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10.28.1 |  |  |            |  | Loan Agreement, dated December 8, 1998,
    between Lodgian AMI, Inc., and Banc One Capital Funding
    Corporation (relating to Holiday Inn  Inner
    Harbor).(f)                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10.28.2 |  |  |            |  | Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Servico Concord, Inc., Penmoco Inc.,
    and Island Motel Enterprises, Inc., in favor of Banc One Capital
    Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.28.3 |  |  |            |  | Limited Guaranty and Indemnity Agreement, dated
    December 8, 1998, by Lodgian, Inc., in favor of Banc One
    Capital Funding Corporation.(f)                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10.29   |  |  |            |  | Form of Amendment No. 1, Waiver and Consent
    to the Credit Agreement among Lodgian Financing Corp., Lodgian,
    Inc., Impac Hotel Group, LLC, Servico Inc., the other Affiliate
    Guarantors party hereto, the Lenders and Issuing Bank named
    herein, Morgan Stanley Senior Funding, Inc., as Administrative
    Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc.,
    as Co-Lead Arranger, Joint-Book Manager and Syndication Agent,
    Lehman Brothers Inc., as Co-Lead Arranger, Joint-Book Manager
    and Lehman Commercial Paper Inc., as Documentation Agent.(k)
|        | 10.30   |  |  |            |  | Form of Consolidated, Amended and Restated Loan
    Agreement dated as of August 31, 2000 by and among Impac
    Hotels II, L.L.C. and Impac Hotels III, L.L.C. and the Capital
    Company of America LLC.(k)                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10.31   |  |  |            |  | Employment Agreement dated November 1, 2001
    between Lodgian, Inc. and David E. Hawthorne.(l)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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##### Table of Contents



|        |       |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ----- |  |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |            
|No.     |       |  |  | Description
|        |       |  |  |            
|        | 10.32 |  |  |            |  | Amendment No. 2 To The Credit Agreement And
    Amendment No. 1 To The Security Agreement (referred to
    herein as this Amendment) among Lodgian Financing
    Corp. (the Borrower), Lodgian, Inc. (the
    Parent), Impac Hotel Group, LLC, Servico Inc., the
    other Affiliate Guarantors and Grantors party hereto, the
    Lenders and Issuing Bank named herein, Morgan Stanley Senior
    Funding, Inc., as Administrative Agent and Collateral Agent,
    Morgan Stanley Senior Funding, Inc., as Co-Lead Arranger,
    Joint-Book Manager and Syndication Agent, Lehman Brothers Inc.,
    as Co-Lead Arranger, Joint-Book Manager and Lehman Commercial
    Paper Inc., as Documentation Agent.(n)                                                                  
|        | 10.33 |  |  |            |  | Forbearance Agreement dated as of
    October 17, 2001 with respect to the Credit Agreement dated
    July 23, 1999 (as heretofore amended, the Credit
    Agreement) among Lodgian Financing Corp. (the
    Borrower), Lodgian, Inc. (the Parent),
    Impac Hotel Group LLC, Servico, Inc., the affiliate Guarantors
    party thereto, the Lenders party thereto (the
    Lender), Morgan Stanley Senior Funding, Inc., as
    Administrative Agent (the Administrative Agent),
    Collateral Agent, Co-Lead Arranger, Joint Book Manager and
    Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and
    Joint Book Manager and Lehman Commercial Paper Inc., as
    Documentation Agent (collectively with the Administrative Agent,
    the Agents).(n)
|        | 10.34 |  |  |            |  | Forbearance Agreement dated as of
    November 14, 2001 with respect to the Credit Agreement
    dated July 23, 1999 (as amended, the Credit
    Agreement) among Lodgian Financing Corp. (the
    Borrower), Lodgian, Inc. (the Parent),
    Impac Hotel Group LLC, Servico, Inc., the affiliate Guarantors
    party thereto, the Lenders party thereto (the
    Lenders), Morgan Stanley Senior Funding Inc., as
    Administrative Agent (the Administrative Agent),
    Collateral Agent, Co-Lead Arranger, Joint Book Manager and
    Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and
    Joint Book Manager and Lehman Commercial Paper Inc., as
    Documentation Agent (collectively with the Administrative Agent,
    (the Agents).(n)         
|        | 10.35 |  |  |            |  | Form of Voluntary Petition under Chapter 11
    of the U. S. Bankruptcy Code filed with the United States
    Bankruptcy Court Southern District of New York by Lodgian Inc.
    and 81 of its subsidiaries.(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10.36 |  |  |            |  | Revolving Credit Agreement among Lodgian, Inc., a
    debtor in possession under Chapter 11 of the Bankruptcy
    Code as borrower and certain subsidiaries of the borrower and
    Morgan Stanley Senior Funding, Inc., as administrative agent and
    collateral agent dated December 31, 2001.(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10.37 |  |  |            |  | Final order authorizing debtors to use cash
    collateral in which certain mortgage lenders claim an
    interest.(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10.38 |  |  |            |  | Final order (i) authorizing debtors
    (A) to obtain post-petition financing and (B) to
    utilize cash collateral and (ii) granting adequate protection to
    pre-petition secured parties.(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.39 |  |  |            |  | Stipulation and Order among the debtors and JP
    Morgan Chase Bank as Successor Indenture Trustee, providing for
    (i) limited use of cash collateral and adequate protection and
    (ii) related relief.(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10.40 |  |  |            |  | Stipulation and order among the debtors and Crimi
    Mae Services, L.P. as special servicer, providing for
    (i) limited use of cash collateral and adequate protection
    and (ii) related relief (low leverage debtor).(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10.41 |  |  |            |  | Stipulation and order among debtors and Lennar
    Partners Inc. as special servicer, providing for
    (i) limited use of cash collateral and adequate protection
    and (ii) related relief.(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.42 |  |  |            |  | Agreed order regarding debtors motion of
    entry of orders (i) authorizing the debtors-in-possession
    to (A) obtain post-petition financing, (B) grant liens
    and priority administrative expense claims status,
    (C) modify the automatic stay, and (D) enter into
    financing agreement; and (ii) approving the use of cash
    collateral and granting adequate protection regarding Nationwide
    loans.(n)                                                                                                                                                                                                                                                                                                                                                         
|        | 10.43 |  |  |            |  | Affidavit and disclosure statement of Richard
    Cartoon LLC in support of application to employ Richard Cartoon
    LLC as Chief Financial Officer.(n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10.44 |  |  |            |  | Loan And Security Agreement dated as of November,
    25 2002 entered into by and between certain Lodgian subsidiaries
    (Borrowers), and Merrill Lynch Mortgage Lending,
    Inc., a Delaware corporation (together with its successors and
    assigns, Lender)(s).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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##### Table of Contents



|        |       |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ----- |  |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |            
|No.     |       |  |  | Description
|        |       |  |  |            
|        | 10.45 |  |  |            |  | Mezzanine Loan Agreement (this Loan
    Agreement) is dated as of November 25, 2002 and
    entered into by and between Impac Hotel Group Mezzanine, LLC,
    Servico Operations Mezzanine, LLC, And Lodgian Financing
    Mezzanine, LLC, Island Motel Enterprises, Inc. And Penmoco, Inc.
    (collectively, Borrowers, and individually, each a
    Borrower), and Merrill Lynch Mortgage Lending, Inc.,
    a Delaware corporation (together with its successors and
    assigns, Lender)(s).
|        | 10.46 |  |  |            |  | 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(o)                                                                                                                                                                                                                                              
|        | 10.47 |  |  |            |  | First Amended 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
    November 5, 2002(p)                                                                                                                                                                                                                                                           
|        | 10.48 |  |  |            |  | Order Confirming the First Amended Joint Plan of
    Reorganization of Lodgian, Inc., et al., issued on
    November 5, 2002 by the United States Bankruptcy Court for
    the Southern District of New York (Incorporated by reference to
    the Registrants Current Report on Form 8-K, filed on
    November 20, 2002(p)                                                                                                                                                                            
|        | 10.49 |  |  |            |  | Amendment to Restated Certificate of
    Incorporation of Lodgian, Inc.(q)                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10.50 |  |  |            |  | Certificate of Designation for Series A
    Preferred Stock of Lodgian, Inc.(q)                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10.51 |  |  |            |  | Class A Warrant Agreement between Lodgian,
    Inc. and Wachovia Bank, N.A.(q)                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.52 |  |  |            |  | Class B Warrant Agreement between Lodgian,
    Inc. and Wachovia Bank, N.A.(q)                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.53 |  |  |            |  | Form of Registration Rights Agreement between
    Lodgian, Inc. and the other signatories thereto(q)                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.54 |  |  |            |  | Form of Voluntary Petition under Chapter 11
    of the U. S. Bankruptcy Code filed with the United States
    Bankruptcy Court Southern District of New York by New Orleans
    Airport Motel Associates LP(r)                                                                                                                                                                                                                                                                                           
|        | 10.55 |  |  |            |  | First Amendment to Employment Agreement between
    Lodgian, Inc. and David Hawthorne(s)                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 12.2  |  |  |            |  | Statement Regarding Computation of Earnings to
    Fixed Charges.(h)                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 21.1  |  |  |            |  | Subsidiaries of Lodgian, Inc.(s)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 23.1  |  |  |            |  | Consent of Deloitte and Touche LLP with respect
    to Form S-8 in respect of the Companys
    401(k) Plan(s).                                                                                                                                                                                                                                                                                                                                                                                          
|        | 23.2  |  |  |            |  | Notice regarding consent of Arthur Andersen LLP
    with respect to Form S-8 in respect of the Companys
    401(k) Plan (s).                                                                                                                                                                                                                                                                                                                                                                            
|        | 99.1  |  |  |            |  | Sarbanes-Oxley Section 906 certification by
    the CEO                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 99.2  |  |  |            |  | Sarbanes-Oxley Section 906 certification by
    the CFO                                                                                                                                                                                                                                                                                                                                                                                                                                                  



---



|    |  |                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | This exhibit is incorporated by reference to
    exhibits and appendices to the Companys Registration
    Statement on Form S-4, as amended, filed on July 17,
    1998. (SEC File No. 333-59315)     
|   
|(b) |  | This exhibit is incorporated by reference to
    Servico, Inc.s Form 10-K for the year ended
    December 31, 1997, filed on March 31, 1998. (SEC File
    No. 001-11342)                             
|   
|(c) |  | This exhibit is incorporated by reference to
    Servico, Inc.s Form 8-K dated March 20, 1998,
    filed on March 26, 1998. (SEC File No 00-11342)                                                    
|   
|(d) |  | This exhibit is incorporated by reference to the
    Companys Form 8-K dated December 11, 1998, filed
    on December 28, 1998. (SEC File No. 001-14537)                                              
|   
|(e) |  | This exhibit is incorporated by reference to the
    Companys Form 8-K dated March 9, 2000, filed on
    March 9, 2000. (SEC File No. 001-14537)                                                      
|   
|(f) |  | This exhibit is incorporated by reference to
    exhibits and appendices to the Companys Registration
    Statement on Form S-4, as amended, filed on August 13,
    1999. (SEC File No. 333-85235-01)
|   
|(g) |  | This exhibit is incorporated by reference to
    exhibits and appendices to the Companys Annual Report on
    Form 10-K, filed on March 31, 1999. (SEC File
    No. 001-14537)                        

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##### Table of Contents





|    |  |                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(h) |  | This exhibit is incorporated by reference to
    exhibits and appendices to the Companys Registration
    Statement on Form S-1, as amended, filed on July 14,
    1999. (SEC File No. 333-82859)
|   
|(i) |  | This exhibit is incorporated by reference to
    Servicos Form 10-Q for the period ended June 30,
    1997, filed on August 14, 1997, (SEC File No. 001-11342)                                   
|   
|(j) |  | This exhibit is incorporated by reference to
    Servicos Form 8-K filed on September 17, 1998.
    (SEC File No. 001-11342)                                                                     
|   
|(k) |  | This exhibit is incorporated by reference to the
    Companys Form 10-Q dated March 31, 2000, filed
    on December 15, 2000. (SEC File No. 001-14537)                                           
|   
|(l) |  | This exhibit is incorporated by reference to the
    Companys Form 10-Q for the period ended
    September 30, 2001, filed on November 14, 2001 (SEC
    File No. 0001-14537                     
|   
|(m) |  | This exhibit is incorporated by reference to the
    Companys Form 10-K for the year ended
    December 31, 2000 (SEC file No. 001-14537)                                                        
|   
|(n) |  | This exhibit is incorporated by reference to the
    Companys Form 10-K for the year ended
    December 31, 2001, filed on April 1, 2002 (SEC file
    No. 001-14537)                            
|   
|(o) |  | This exhibit is incorporated by reference to the
    Companys Form 8-K filed on November 6, 2002 (SEC
    File No. 001-14537)                                                                    
|   
|(p) |  | This exhibit is incorporated by reference to the
    Companys 8-K filed on November 20, 2002 (SEC File
    No. 001-14537)                                                                        
|   
|(q) |  | This exhibit is incorporated by reference to the
    Companys form 8-A filed on November 25, 2002 (SEC
    File No. 000-50108)                                                                   
|   
|(r) |  | This exhibit is incorporated by reference to the
    Companys Form 10-Q for the quarter ended
    March 31, 2002, filed on May 15, 2002 (SEC File No.
    001-14537)                             
|   
|(s) |  | Filed herewith                                                                                                                                                                                    

8