##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|x          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.   
|          
|           |  | For the fiscal year ended December 31, 2004                                                 
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from          to                                              

Commission file no. 1-14537





Lodgian, Inc.


(Exact name of registrant as specified in its charter)


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

Registrants telephone number, including area code:


(404) 364-9400


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


|                                       |  |                                          
|-------------------------------------- |  | -----------------------------------------
|Title of Each Class                    |  | Name of Each Exchange on Which Registered
|                                       |  |                                          
|Common Stock, $.01 par value per share |  | American Stock Exchange                  

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


Title of Each Class









þ o


o


þ o




þ o




DOCUMENTS INCORPORATED BY REFERENCE












---










LODGIAN, INC.


Form 10-K


For the Year Ended December 31, 2004


TABLE OF CONTENTS


|                                                   |  |                                                                                           |    |      |    | 
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                   |  |                                                                                           |    | Page |   
|                                                   |  |                                                                                           |    |      |   
|PART I                                            
|Item 1.                                            |  | Business                                                                                  |    |      | 2  | 
|Item 2.                                            |  | Properties                                                                                |    |      | 33 | 
|Item 3.                                            |  | Legal Proceedings                                                                         |    |      | 33 | 
|Item 4.                                            |  | Submission of Matters to a Vote of Security
    Holders                                   |    |      | 33 | 
|                                                  
|PART II                                           
|Item 5.                                            |  | Market for Registrants Common Equity
    and Related Stockholder Matters                 |    |      | 33 | 
|Item 6.                                            |  | Selected Financial Data                                                                   |    |      | 36 | 
|Item 7.                                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operation  |    |      | 38 | 
|Item 7A.                                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                            |    |      | 69 | 
|Item 8.                                            |  | Financial Statements and Supplementary
    Data                                           |    |      | 70 | 
|Item 9.                                            |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosures |    |      | 70 | 
|Item 9A.                                           |  | Controls and Procedures                                                                   |    |      | 70 | 
|Item 9B.                                           |  | Other information                                                                         |    |      | 72 | 
|                                                  
|PART III                                          
|Item 10.                                           |  | Directors and Executive Officers of the
    Registrant                                    |    |      | 72 | 
|Item 11.                                           |  | Executive Compensation                                                                    |    |      | 72 | 
|Item 12.                                           |  | Security Ownership of Certain Beneficial
    Owners and Management                        |    |      | 72 | 
|Item 13.                                           |  | Certain Relationships and Related
    Transactions                                        |    |      | 72 | 
|Item 14.                                           |  | Principal Accounting Fees and Services                                                    |    |      | 72 | 
|                                                  
|PART IV                                           
|Item 15.                                           |  | Exhibits, Financial Statement Schedules                                                   |    |      | 72 | 
|Signatures                                         |  |                                                                                           | 73 |     
|EX-10.15.11 LOAN MODIFICATION AGREEMENT           
|EX-10.15.12 AMENDED AND RESTATED PROMISSORY NOTE  
|EX-10.17.11 LOAN MODIFICATION AGREEMENT           
|EX-10.17.12 AMENDED AND RESTATED PROMISSORY NOTE  
|EX-10.26 LETTER AGREEMENT DATED FEBRUARY 4, 2005  
|EX-10.29 RELEASE AGREEMENT DATED JANUARY 31, 2005 
|EX-10.32 EMPLOYMENT AGREEMENT / LINDA B. PHILP    
|EX-10.33 STOCK OPTION AGREEMENT                   
|EX-10.34 INCENTIVE STOCK OPTION AGREEMENT         
|EX-10.35 INCENTIVE STOCK OPTION AGREEMENT         
|EX-10.37 FORM OF INCENTIVE STOCK OPTION AGREEMENT 
|EX-21.1 SUBSIDIARIES OF LODGIAN, INC.             
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO      
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO      
|EX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO



1



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

When we use the terms Lodgian, we,
our, and us, we mean Lodgian, Inc.
and its subsidiaries.


Our Company






| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | 79 hotels that we wholly own and operate through
    subsidiaries;                                                           
|
| |  | four hotels that we operate in joint ventures in which we have a
    50% or greater equity interest and exercise control; and
|
| |  | one hotel that we operate in a joint venture in which we have a
    30% non-controlling equity interest.                     







Our Operations






2



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Corporate History














3



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Franchise Affiliations








|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        |  |    |    |  |  |        |       | 
|--------------------------------------- | ----------------------------- | ---------- | -- | -- | ------------ |  | ----- | ------ |  |  | ------ | - |  | ------ | ----- | ----- | ------ |  | -- | -- |  |  | ------ | ----- | 
|                                        |                               | Continuing |    |    | Discontinued |  |       |       
|                                        |                               | Operations |    |    | Operations   |  |       | Total  | 
|                                        |                               |            |    |    |              |  |       |        | 
|                                        |                               | No. of     |    |    | No. of       |  |       | No. of |  |  | No. of |   |  | No. of |       |       | No. of | 
|                                        |                               | Hotels     |    |    | Rooms        |  |       | Hotels |  |  | Rooms  |   |  | Hotels |       |       | Rooms  | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        | 
|InterContinental Hotels Group PLC (IHG) |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        |  |    |    |  |  |        |      
|                                        | Holiday Inn                   |            |    | 35 |              |  |       | 6,348  |  |  |        | 5 |  |        |       | 1,397 |        |  |    | 40 |  |  |        | 7,745 | 
|                                        | Holiday Inn Express           |            |    | 3  |              |  |       | 363    |  |  |        | 1 |  |        |       | 141   |        |  |    | 4  |  |  |        | 504   | 
|                                        | Holiday Inn Select            |            |    | 3  |              |  |       | 798    |  |  |        | 1 |  |        |       | 397   |        |  |    | 4  |  |  |        | 1,195 | 
|                                        | Crowne Plaza                  |            |    | 8  |              |  |       | 2,201  |  |  |        |  |  |        |       |      |        |  |    | 8  |  |  |        | 2,201 | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        | 
|Total IHG                               |                               |            | 49 |    |              |  | 9,710 |        |  |  | 7      |   |  |        | 1,935 |       |        |  | 56 |    |  |  | 11,645 |      
|                                       
|Marriott International, Inc.            |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        |  |    |    |  |  |        |      
|                                        | Marriott                      |            |    | 1  |              |  |       | 238    |  |  |        |  |  |        |       |      |        |  |    | 1  |  |  |        | 238   | 
|                                        | Courtyard by Marriott         |            |    | 7  |              |  |       | 760    |  |  |        |  |  |        |       |      |        |  |    | 7  |  |  |        | 760   | 
|                                        | Fairfield Inn by Marriott     |            |    | 5  |              |  |       | 563    |  |  |        |  |  |        |       |      |        |  |    | 5  |  |  |        | 563   | 
|                                        | Springhill Suites by Marriott |            |    | 1  |              |  |       | 107    |  |  |        |  |  |        |       |      |        |  |    | 1  |  |  |        | 107   | 
|                                        | Residence Inn by Marriott     |            |    | 2  |              |  |       | 177    |  |  |        |  |  |        |       |      |        |  |    | 2  |  |  |        | 177   | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        | 
|Total Marriott                          |                               |            | 16 |    |              |  | 1,845 |        |  |  |       |   |  |        |      |       |        |  | 16 |    |  |  | 1,845  |      
|                                       
|Hilton Hotels Corporation               |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        |  |    |    |  |  |        |      
|                                        | Hilton                        |            |    | 3  |              |  |       | 587    |  |  |        |  |  |        |       |      |        |  |    | 3  |  |  |        | 587   | 
|                                        | DoubleTree Club               |            |    | 1  |              |  |       | 190    |  |  |        |  |  |        |       |      |        |  |    | 1  |  |  |        | 190   | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        | 
|Total Hilton                            |                               |            | 4  |    |              |  | 777   |        |  |  |       |   |  |        |      |       |        |  | 4  |    |  |  | 777    |      
|                                       
|Choice Hotels International, Inc.       |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        |  |    |    |  |  |        |      
|                                        | Clarion                       |            |    | 2  |              |  |       | 590    |  |  |        |  |  |        |       |      |        |  |    | 2  |  |  |        | 590   | 
|                                        | Quality                       |            |    | 1  |              |  |       | 102    |  |  |        | 1 |  |        |       | 205   |        |  |    | 2  |  |  |        | 307   | 
|                                        |                               |            |    |    |              |  |       |        |  |  |        |   |  |        |       |       |        | 
|Total Choice                            |                               |            | 3  |    |              |  | 692   |        |  |  | 1      |   |  |        | 205   |       |        |  | 4  |    |  |  | 897    |      

4



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|                         |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        |  |   |   |    |  |     |     |        | 
|------------------------ | -------- | ---------------- | - | - | ------------ |  | --- | ------ | ------ |  | ------ | - | - | ------ | - | - | ------ |  | - | - | -- |  | --- | --- | ------ | 
|                         |          | Continuing       |   |   | Discontinued |  |     |       
|                         |          | Operations       |   |   | Operations   |  |     | Total  |       
|                         |          |                  |   |   |              |  |     |        |       
|                         |          | No. of           |   |   | No. of       |  |     | No. of |        |  | No. of |   |   | No. of |   |   | No. of | 
|                         |          | Hotels           |   |   | Rooms        |  |     | Hotels |        |  | Rooms  |   |   | Hotels |   |   | Rooms  | 
|                         |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        | 
|                        
|Carlson Companies        |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        |  |   |   |    |  |     |    
|                         | Radisson |                  |   | 1 |              |  |     | 159    |        |  |        |  |   |        |   |  |        |  |   | 1 |    |  |     | 159 |       
|Non-franchised hotels(1) |          |                  | 3 |   |              |  | 535 |        |        |  |       |   |   |        |  |   |        |  | 3 |   |    |  | 535 |    
|                         |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        | 
|                         |          | Total All Hotels |   |   | 76           |  |     |        | 13,718 |  |        |   | 8 |        |   |   | 2,140  |  |   |   | 84 |  |     |     | 15,858 | 
|                         |          |                  |   |   |              |  |     |        |        |  |        |   |   |        |   |   |        | 






|    |                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------
|(1) | Includes one hotel with 244 rooms that is being converted
    to a Radisson in May 2005 upon completion of its renovation.











| |   |                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Five of these hotels are held for sale;                                                                                                                                                                                                                                 
|
| |  | Seven of the remaining hotels either just completed a major
    renovation, are undergoing a major renovation or a major
    renovation is planned, and the total cost of the renovations is
    projected to be $22.8 million of which $7.6 million
    has been spent;
|
| |  | One of the remaining hotels has a franchise agreement that
    expires in 2005 and is expected to be renovated upon selection
    of a new franchise. The total cost of the renovation will not be
    known until the franchisor inspects the property;                
|
| |  | Four of the remaining hotels are expected to be in full
    compliance with their franchise agreements during the next
    testing period;                                                                                                                              
|
| |  | Two of the remaining hotels are above the required franchise
    thresholds and must remain above those levels until February
    2006 to receive a clean slate letter;                                                                                               

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| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | One of the remaining hotels has implemented plans to improve
    service levels to return to compliance levels; and                                                                                                                                                                             
|
| |  | One hotel, which is 60% owned by the company, will undergo a
    major renovation after we complete the buyout of our minority
    partner in the second quarter of 2005. The renovation is
    expected to be completed in the first quarter of 2006 and is
    estimated to cost $4.3 million.











6



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Sales and Marketing










Joint Ventures




Growth Strategy




7



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Competition and Seasonality








The Lodging Industry








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





| |   |                                     
| | - | ------------------------------------
| |  | Upper Upscale (Hilton and Marriott);

8



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



|                                 |  |      |     |  
|-------------------------------- |  | ---- | --- | -
|Chain-Scale Segment              |  | 2004 |    
|                                 |  |      |    
|Upper Upscale                    |  |      | 8.2 | %
|Upscale                          |  |      | 8.7 | %
|Midscale with Food & Beverage    |  |      | 6.3 | %
|Midscale without Food & Beverage |  |      | 7.2 | %
|U.S. Average                     |  |      | 7.8 | %




Smith Travel Research




Properties






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



|                                                    |  |        |     |  |          |            |                     |              |  |  |                 | 
|--------------------------------------------------- |  | ------ | --- |  | -------- | ---------- | ------------------- | ------------ |  |  | --------------- | 
|                                                    |  |        |     |  |          | Year of    |                    
|                                                    |  |        |     |  |          | Last Major |                    
|                                                    |  | No. of |     |  |          |            | Renovation or       |             
|Franchisor/Hotel Name                               |  | Rooms  |     |  | Location |            |                     | Construction | 
|                                                    |  |        |     |  |          |            |                     |              | 
|InterContinental Hotels Group PLC (IHG) (56 hotels)
|Crowne Plaza Albany                                 |  |        | 384 |  |          |            | Albany, NY          |              |  |  | 2001            | 
|Crowne Plaza Cedar Rapids(4)                        |  |        | 275 |  |          |            | Cedar Rapids, IA    |              |  |  | 1998            | 
|Crowne Plaza Houston(4)                             |  |        | 291 |  |          |            | Houston, TX         |              |  |  | 1999            | 
|Crowne Plaza Macon (60% owned)(4)                   |  |        | 297 |  |          |            | Macon, GA           |              |  |  | 1996            | 
|Crowne Plaza Pittsburgh                             |  |        | 193 |  |          |            | Pittsburgh, PA      |              |  |  | 2001            | 
|Crowne Plaza West Palm Beach (50% owned)(3)         |  |        | 219 |  |          |            | West Palm Beach, FL |              |  |  | Being renovated | 
|Crowne Plaza Worcester(4)                           |  |        | 243 |  |          |            | Worcester, MA       |              |  |  | 1996            | 
|Crowne Plaza Phoenix Airport                        |  |        | 299 |  |          |            | Phoenix, AZ         |              |  |  | 2004            | 
|Holiday Inn Express Dothan                          |  |        | 112 |  |          |            | Dothan, AL          |              |  |  | 2002            | 
|Holiday Inn Express Gadsden(2)                      |  |        | 141 |  |          |            | Gadsden, AL         |              |  |  | 1996            | 
|Holiday Inn Express Palm Desert                     |  |        | 129 |  |          |            | Palm Desert, CA     |              |  |  | 2003            | 

9



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|                                              |  |        |     |  |          |            |                     |              |  |  |                 | 
|--------------------------------------------- |  | ------ | --- |  | -------- | ---------- | ------------------- | ------------ |  |  | --------------- | 
|                                              |  |        |     |  |          | Year of    |                    
|                                              |  |        |     |  |          | Last Major |                    
|                                              |  | No. of |     |  |          |            | Renovation or       |             
|Franchisor/Hotel Name                         |  | Rooms  |     |  | Location |            |                     | Construction | 
|                                              |  |        |     |  |          |            |                     |              | 
|Holiday Inn Express Pensacola University Mall |  |        | 122 |  |          |            | Pensacola, FL       |              |  |  | 2002            | 
|Holiday Inn Select DFW Airport                |  |        | 282 |  |          |            | Dallas, TX          |              |  |  | 1997            | 
|Holiday Inn Select Niagara Falls(1)           |  |        | 397 |  |          |            | Niagara Falls, NY   |              |  |  | 1999            | 
|Holiday Inn Select Strongsville(4)            |  |        | 302 |  |          |            | Cleveland, OH       |              |  |  | 1996            | 
|Holiday Inn Select Windsor                    |  |        | 214 |  |          |            | Windsor, Ontario    |              |  |  | 2004            | 
|Holiday Inn Arden Hills/ St. Paul(4)          |  |        | 156 |  |          |            | St. Paul, MN        |              |  |  | 1995            | 
|Holiday Inn Austin  South(1)                 |  |        | 210 |  |          |            | Austin, TX          |              |  |  | 1994            | 
|Holiday Inn Brunswick(5)                      |  |        | 126 |  |          |            | Brunswick, GA       |              |  |  | Being renovated | 
|Holiday Inn BWI Airport(4)                    |  |        | 260 |  |          |            | Baltimore, MD       |              |  |  | 2000            | 
|Holiday Inn City Center (30% owned)           |  |        | 240 |  |          |            | Columbus, OH        |              |  |  | 2002            | 
|Holiday Inn Clarksburg                        |  |        | 159 |  |          |            | Clarksburg, WV      |              |  |  | 1997            | 
|Holiday Inn Cromwell Bridge                   |  |        | 139 |  |          |            | Cromwell Bridge, MD |              |  |  | 2000            | 
|Holiday Inn East Hartford                     |  |        | 130 |  |          |            | East Hartford, CT   |              |  |  | 2000            | 
|Holiday Inn Fairmont                          |  |        | 106 |  |          |            | Fairmont, WV        |              |  |  | 1997            | 
|Holiday Inn Fort Wayne                        |  |        | 208 |  |          |            | Fort Wayne, IN      |              |  |  | 1995            | 
|Holiday Inn Frederick                         |  |        | 158 |  |          |            | Frederick, MD       |              |  |  | 2000            | 
|Holiday Inn Frisco                            |  |        | 217 |  |          |            | Frisco, CO          |              |  |  | 1997            | 
|Holiday Inn Glen Burnie North                 |  |        | 127 |  |          |            | Glen Burnie, MD     |              |  |  | 2000            | 
|Holiday Inn Greentree                         |  |        | 201 |  |          |            | Pittsburgh, PA      |              |  |  | 2000            | 
|Holiday Inn Hamburg                           |  |        | 130 |  |          |            | Buffalo, NY         |              |  |  | 1998            | 
|Holiday Inn Hilton Head(4)                    |  |        | 202 |  |          |            | Hilton Head, SC     |              |  |  | 2001            | 
|Holiday Inn Inner Harbor                      |  |        | 375 |  |          |            | Baltimore, MD       |              |  |  | Being renovated | 
|Holiday Inn Jamestown                         |  |        | 146 |  |          |            | Jamestown, NY       |              |  |  | 1998            | 
|Holiday Inn Jekyll Island(1)                  |  |        | 198 |  |          |            | Jekyll Island, GA   |              |  |  | 2000            | 
|Holiday Inn Lancaster (East)                  |  |        | 189 |  |          |            | Lancaster, PA       |              |  |  | 2000            | 
|Holiday Inn Lansing West(4)                   |  |        | 244 |  |          |            | Lansing, MI         |              |  |  | 1998            | 
|Holiday Inn Lawrence                          |  |        | 192 |  |          |            | Lawrence, KS        |              |  |  | 2002            | 
|Holiday Inn Manhattan                         |  |        | 197 |  |          |            | Manhattan, KS       |              |  |  | 2002            | 
|Holiday Inn Marietta                          |  |        | 193 |  |          |            | Marietta, GA        |              |  |  | 2003            | 
|Holiday Inn McKnight Road                     |  |        | 146 |  |          |            | Pittsburgh, PA      |              |  |  | 1995            | 
|Holiday Inn Meadowlands                       |  |        | 138 |  |          |            | Pittsburgh, PA      |              |  |  | Being renovated | 
|Holiday Inn Melbourne (50% owned)(3)          |  |        | 295 |  |          |            | Melbourne, FL       |              |  |  | Being renovated | 
|Holiday Inn Monroeville                       |  |        | 188 |  |          |            | Monroeville, PA     |              |  |  | Being renovated | 
|Holiday Inn Myrtle Beach(4)                   |  |        | 133 |  |          |            | Myrtle Beach, SC    |              |  |  | 1998            | 
|Holiday Inn Parkway East(1)                   |  |        | 177 |  |          |            | Pittsburgh, PA      |              |  |  | 2001            | 
|Holiday Inn Phoenix West                      |  |        | 144 |  |          |            | Phoenix, AZ         |              |  |  | 2003            | 
|Holiday Inn Rolling Meadows(1)                |  |        | 422 |  |          |            | Rolling Meadows, IL |              |  |  | 2000            | 
|Holiday Inn Santa Fe(4)                       |  |        | 130 |  |          |            | Santa Fe, NM        |              |  |  | 2003            | 
|Holiday Inn Sheffield(4)                      |  |        | 201 |  |          |            | Sheffield, AL       |              |  |  | Being renovated | 
|Holiday Inn Silver Spring(6)                  |  |        | 231 |  |          |            | Silver Spring, MD   |              |  |  | Being renovated | 
|Holiday Inn St. Louis North(2)                |  |        | 390 |  |          |            | St. Louis, MO       |              |  |  | 1996            | 
|Holiday Inn University Mall                   |  |        | 152 |  |          |            | Pensacola, FL       |              |  |  | 1997            | 

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|                                             |                |        |     |        |          |            |                  |              |  |  |                 |  | 
|-------------------------------------------- | -------------- | ------ | --- | ------ | -------- | ---------- | ---------------- | ------------ |  |  | --------------- |  | 
|                                             |                |        |     |        |          | Year of    |                 
|                                             |                |        |     |        |          | Last Major |                 
|                                             |                | No. of |     |        |          |            | Renovation or    |             
|Franchisor/Hotel Name                        |                | Rooms  |     |        | Location |            |                  | Construction | 
|                                             |                |        |     |        |          |            |                  |              | 
|Holiday Inn Valdosta                         |                |        | 167 |        |          |            | Valdosta, GA     |              |  |  | 2003            | 
|Holiday Inn Winter Haven                     |                |        | 228 |        |          |            | Winter Haven, FL |              |  |  | 2004            | 
|Holiday Inn York                             |                |        | 100 |        |          |            | York, PA         |              |  |  | 2000            | 
|                                             |                |        |     |        |          |            |                  |              | 
|                                             | Total IHG      |        |     | 11,645 |          |            |                  |              |  |  |                 |  | 
|                                            
|Marriott International Inc. (16 hotels)      |                |        |     |        |          |            |                  |              |  |  |                 | 
|Courtyard by Marriott Abilene                |                |        | 99  |        |          |            | Abilene, TX      |              |  |  | 2004            | 
|Courtyard by Marriott Bentonville            |                |        | 90  |        |          |            | Bentonville, AR  |              |  |  | 2004            | 
|Courtyard by Marriott Buckhead               |                |        | 181 |        |          |            | Atlanta, GA      |              |  |  | 2004            | 
|Courtyard by Marriott Florence               |                |        | 78  |        |          |            | Florence, KY     |              |  |  | 2004            | 
|Courtyard by Marriott Lafayette              |                |        | 90  |        |          |            | Lafayette, LA    |              |  |  | 2004            | 
|Courtyard by Marriott Paducah                |                |        | 100 |        |          |            | Paducah, KY      |              |  |  | 2004            | 
|Courtyard by Marriott Tulsa                  |                |        | 122 |        |          |            | Tulsa, OK        |              |  |  | 2004            | 
|Fairfield Inn by Marriott Augusta            |                |        | 117 |        |          |            | Augusta, GA      |              |  |  | 2002            | 
|Fairfield Inn by Marriott Colchester         |                |        | 117 |        |          |            | Colchester, VT   |              |  |  | 2002            | 
|Fairfield Inn by Marriott Jackson            |                |        | 105 |        |          |            | Jackson, TN      |              |  |  | 2002            | 
|Fairfield Inn by Marriott Merrimack          |                |        | 116 |        |          |            | Merrimack, NH    |              |  |  | 2004            | 
|Fairfield Inn by Marriott Valdosta           |                |        | 108 |        |          |            | Valdosta, GA     |              |  |  | 2004            | 
|Marriott Denver Airport                      |                |        | 238 |        |          |            | Denver, CO       |              |  |  | 1998            | 
|Residence Inn by Marriott Dedham             |                |        | 81  |        |          |            | Dedham, MA       |              |  |  | 2004            | 
|Residence Inn by Marriott Little Rock        |                |        | 96  |        |          |            | Little Rock, AR  |              |  |  | 1998            | 
|Springhill Suites by Marriott Pinehurst(4)   |                |        | 107 |        |          |            | Pinehurst, NC    |              |  |  | 1999            | 
|                                             |                |        |     |        |          |            |                  |              | 
|                                             | Total Marriott |        |     | 1,845  |          |            |                  |              |  |  |                 |  | 
|Hilton Hotels Corporation (4 hotels)        
|DoubleTree Club Philadelphia                 |                |        | 190 |        |          |            | Philadelphia, PA |              |  |  | 2003            | 
|Hilton Fort Wayne                            |                |        | 244 |        |          |            | Fort Wayne, IN   |              |  |  | 2003            | 
|Hilton Columbia                              |                |        | 152 |        |          |            | Columbia, MD     |              |  |  | 2003            | 
|Hilton Northfield                            |                |        | 191 |        |          |            | Troy, MI         |              |  |  | 2003            | 
|                                             |                |        |     |        |          |            |                  |              | 
|                                             | Total Hilton   |        |     | 777    |          |            |                  |              |  |  |                 |  | 
|Choice Hotels International, Inc. (4 hotels)
|Clarion Northwoods Atrium Inn                |                |        | 197 |        |          |            | Charleston, SC   |              |  |  | 1994            | 
|Clarion Hotel Louisville                     |                |        | 393 |        |          |            | Louisville, KY   |              |  |  | 2000            | 
|Quality Hotel Metairie(2)                    |                |        | 205 |        |          |            | New Orleans, LA  |              |  |  | 2003            | 
|Quality Inn Dothan                           |                |        | 102 |        |          |            | Dothan, AL       |              |  |  | 1996            | 
|                                             |                |        |     |        |          |            |                  |              | 
|                                             | Total Choice   |        |     | 897    |          |            |                  |              |  |  |                 |  | 
|Carlson Companies (1 hotel)                  |                |        |     |        |          |            |                  |              |  |  |                 | 
|Radisson Phoenix Hotel                       |                |        | 159 |        |          |            | Phoenix, AZ      |              |  |  | Being renovated | 
|                                             |                |        |     |        |          |            |                  |              | 
|                                             | Total Carlson  |        |     | 159    |          |            |                  |              |  |  |                 |  | 

11



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##### Table of Contents



|                                               |                             |        |     |        |          |            |                 |              |  |  |                 |  | 
|---------------------------------------------- | --------------------------- | ------ | --- | ------ | -------- | ---------- | --------------- | ------------ |  |  | --------------- |  | 
|                                               |                             |        |     |        |          | Year of    |                
|                                               |                             |        |     |        |          | Last Major |                
|                                               |                             | No. of |     |        |          |            | Renovation or   |             
|Franchisor/Hotel Name                          |                             | Rooms  |     |        | Location |            |                 | Construction | 
|                                               |                             |        |     |        |          |            |                 |              | 
|Non-franchised hotels (3 hotels)               |                             |        |     |        |          |            |                 |              |  |  |                 | 
|French Quarter Suites Memphis(4)               |                             |        | 105 |        |          |            | Memphis, TN     |              |  |  | 1997            | 
|New Orleans Airport Plaza Hotel (82% owned)(7) |                             |        | 244 |        |          |            | New Orleans, LA |              |  |  | Being renovated | 
|University Inn, Bloomington                    |                             |        | 186 |        |          |            | Bloomington, IN |              |  |  | 1992            | 
|                                               |                             |        |     |        |          |            |                 |              | 
|                                               | Total non-franchised hotels |        |     | 535    |          |            |                 |              |  |  |                 |  | 
|                                               |                             |        |     |        |          |            |                 |              | 
|                                               | All hotels (84 hotels)      |        |     | 15,858 |          |            |                 |              |  |  |                 |  | 






|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These hotels are held for sale and are classified in
    discontinued operations as of December 31, 2004.                                  
|   
|(2) | These hotels were identified as held for sale in January 2005,
    and are classified in continuing operations as of
    December 31, 2004.
|   
|(3) | As of March 1, 2005, this hotel is closed for hurricane
    renovations.                                                                   
|   
|(4) | This hotel is scheduled to be renovated in 2005.                                                                                           
|   
|(5) | This hotel is currently being converted to a Park Inn.                                                                                     
|   
|(6) | This hotel is currently being converted to a Crowne Plaza.                                                                                 
|   
|(7) | This hotel will be converted to a Radisson upon completion of
    its renovation in May 2005.                                              





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



12



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##### Table of Contents





|                              |                                                           |           |     |      |         |  |        |          |   |  |   |    |  
|----------------------------- | --------------------------------------------------------- | --------- | --- | ---- | ------- |  | ------ | -------- | - |  | - | -- | -
|                              |                                                           | Number of |    
|                              |                                                           |           |    
|                              |                                                           |           |     | Land |         |  | Office |         
|                              |                                                           | Hotels    |     |      | Parcels |  |        | Building |  
|                              |                                                           |           |     |      |         |  |        |          |  
|Operated at December 31, 2002 |                                                           |           | 106 |      |         |  | 3      |          |   |  | 1 |   
|                              | Conveyed to lender in January 2003                        |           |     | (8   | )       |  |        |         |   |  |   |   |  
|                              | Returned to the lessor of a capital lease in January 2003 |           |     | (1   | )       |  |        |         |   |  |   |   |  
|                              | Sold in 2003                                              |           |     | (1   | )       |  |        |         |   |  |   | (1 | )
|                              |                                                           |           |     |      |         |  |        |          |  
|Operated at December 31, 2003 |                                                           |           | 96  |      |         |  | 3      |          |   |  |  |   
|                              | Sold in 2004                                              |           |     | (11  | )       |  |        | (2       | ) |  |   |   |  
|                              | Acquired in 2004                                          |           |     | 1    |         |  |        |         |   |  |   |   |  
|                              |                                                           |           |     |      |         |  |        |          |  
|Operated at December 31, 2004 |                                                           |           | 86  |      |         |  | 1      |          |   |  |  |   
|                              | Sold between January 1, 2005 and March 1, 2005            |           |     | (2   | )       |  |        |         |   |  |   |   |  
|                              |                                                           |           |     |      |         |  |        |          |  
|Operated at March 1, 2005     |                                                           |           | 84  |      |         |  | 1      |          |   |  |  |   
|                              |                                                           |           |     |      |         |  |        |          |  



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









| |                                                                
| | ---------------------------------------------------------------
| | Combined Continuing and Discontinued
    Operations  85 hotels

|              |                      |                  |   |            |              |      |   |              |   |  |          |       |   |  |   |       |  
|------------- | -------------------- | ---------------- | - | ---------- | ------------ | ---- | - | ------------ | - |  | -------- | ----- | - |  | - | ----- | -
|              |                      |                  |   | Year Ended |             
|              |                      |                  |   |            |             
|              |                      |                  |   |            |              | 2002 |  
|              |                      | 2004 Capital     |   |            | December 31, |      |   | December 31, |   |  | Combined |      
|              |                      | Expenditures     |   |            | 2004         |      |   | 2003         |   |  | Period   |      
|              |                      |                  |   |            |              |      |   |              |   |  |          |      
|              |                      | ($ in thousands) |   |            |              |      |   |              |  
|Upper Upscale |                      |                  |   |            |              |      |   |              |   |  |          |       |   |  |   |      
|              | Number of properties |                  | $ | 794        |              |      |   | 4            |   |  |          | 4     |   |  |   | 4     |  
|              | Number of rooms      |                  |   |            |              |      |   | 825          |   |  |          | 825   |   |  |   | 825   |  
|              | Occupancy            |                  |   |            |              |      |   | 67.3         | % |  |          | 60.7  | % |  |   | 65.6  | %
|              | Average daily rate   |                  |   |            |              |      | $ | 96.09        |   |  | $        | 90.98 |   |  | $ | 93.41 |  
|              | RevPAR               |                  |   |            |              |      | $ | 64.66        |   |  | $        | 55.23 |   |  | $ | 61.32 |  
|Upscale       |                      |                  |   |            |              |      |   |              |   |  |          |       |   |  |   |      
|              | Number of properties |                  |   | 18,591     |              |      |   | 18           |   |  |          | 17    |   |  |   | 17    |  
|              | Number of rooms      |                  |   |            |              |      |   | 3,300        |   |  |          | 3,002 |   |  |   | 3,002 |  
|              | Occupancy            |                  |   |            |              |      |   | 66.1         | % |  |          | 66.1  | % |  |   | 67.5  | %
|              | Average daily rate   |                  |   |            |              |      | $ | 84.80        |   |  | $        | 83.45 |   |  | $ | 83.58 |  
|              | RevPAR               |                  |   |            |              |      | $ | 56.02        |   |  | $        | 55.14 |   |  | $ | 56.39 |  

13



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##### Table of Contents



|                                 |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |        |  
|-------------------------------- | -------------------- | ---------------- |  | ---------- | ------------ | ---- | - | ------------ | - |  | -------- | ------ | - |  | - | ------ | -
|                                 |                      |                  |  | Year Ended |             
|                                 |                      |                  |  |            |             
|                                 |                      |                  |  |            |              | 2002 |  
|                                 |                      | 2004 Capital     |  |            | December 31, |      |   | December 31, |   |  | Combined |       
|                                 |                      | Expenditures     |  |            | 2004         |      |   | 2003         |   |  | Period   |       
|                                 |                      |                  |  |            |              |      |   |              |   |  |          |       
|                                 |                      | ($ in thousands) |  |            |              |      |   |              |  
|Midscale with Food & Beverage    |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 13,143     |              |      |   | 51           |   |  |          | 52     |   |  |   | 51     |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 10,363       |   |  |          | 10,661 |   |  |   | 10,268 |  
|                                 | Occupancy            |                  |  |            |              |      |   | 57.6         | % |  |          | 57.7   | % |  |   | 59.4   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 72.86        |   |  | $        | 71.58  |   |  | $ | 71.62  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 42.00        |   |  | $        | 41.27  |   |  | $ | 42.54  |  
|Midscale without Food & Beverage |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 1,700      |              |      |   | 9            |   |  |          | 9      |   |  |   | 7      |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 1,067        |   |  |          | 1,067  |   |  |   | 833    |  
|                                 | Occupancy            |                  |  |            |              |      |   | 60.0         | % |  |          | 53.9   | % |  |   | 57.6   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 60.50        |   |  | $        | 58.70  |   |  | $ | 56.54  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 36.32        |   |  | $        | 31.64  |   |  | $ | 32.55  |  
|Independent Hotels               |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 2,340      |              |      |   | 3            |   |  |          | 3      |   |  |   | 6      |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 535          |   |  |          | 535    |   |  |   | 1,162  |  
|                                 | Occupancy            |                  |  |            |              |      |   | 36.6         | % |  |          | 41.4   | % |  |   | 44.1   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 63.27        |   |  | $        | 61.98  |   |  | $ | 64.34  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 23.17        |   |  | $        | 25.64  |   |  | $ | 28.40  |  
|All Hotels                       |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 36,568     |              |      |   | 85           |   |  |          | 85     |   |  |   | 85     |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 16,090       |   |  |          | 16,090 |   |  |   | 16,090 |  
|                                 | Occupancy            |                  |  |            |              |      |   | 59.3         | % |  |          | 58.6   | % |  |   | 60.0   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 75.90        |   |  | $        | 74.10  |   |  | $ | 74.21  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 45.01        |   |  | $        | 43.42  |   |  | $ | 44.54  |  



| |                                  
| | ---------------------------------
| | Continuing Operations  78 hotels

|              |                      |                  |   |            |              |      |   |              |   |  |          |       |   |  |   |       |  
|------------- | -------------------- | ---------------- | - | ---------- | ------------ | ---- | - | ------------ | - |  | -------- | ----- | - |  | - | ----- | -
|              |                      |                  |   | Year Ended |             
|              |                      |                  |   |            |             
|              |                      |                  |   |            |              | 2002 |  
|              |                      | 2004 Capital     |   |            | December 31, |      |   | December 31, |   |  | Combined |      
|              |                      | Expenditures     |   |            | 2004         |      |   | 2003         |   |  | Period   |      
|              |                      |                  |   |            |              |      |   |              |   |  |          |      
|              |                      | ($ in thousands) |   |            |              |      |   |              |  
|Upper Upscale |                      |                  |   |            |              |      |   |              |   |  |          |       |   |  |   |      
|              | Number of properties |                  | $ | 794        |              |      |   | 4            |   |  |          | 4     |   |  |   | 4     |  
|              | Number of rooms      |                  |   |            |              |      |   | 825          |   |  |          | 825   |   |  |   | 825   |  
|              | Occupancy            |                  |   |            |              |      |   | 67.3         | % |  |          | 60.7  | % |  |   | 65.6  | %
|              | Average daily rate   |                  |   |            |              |      | $ | 96.09        |   |  | $        | 90.98 |   |  | $ | 93.41 |  
|              | RevPAR               |                  |   |            |              |      | $ | 64.66        |   |  | $        | 55.23 |   |  | $ | 61.32 |  
|Upscale       |                      |                  |   |            |              |      |   |              |   |  |          |       |   |  |   |      
|              | Number of properties |                  |   | 18,591     |              |      |   | 18           |   |  |          | 17    |   |  |   | 17    |  
|              | Number of rooms      |                  |   |            |              |      |   | 3,300        |   |  |          | 3,002 |   |  |   | 3,002 |  
|              | Occupancy            |                  |   |            |              |      |   | 66.1         | % |  |          | 66.1  | % |  |   | 67.5  | %
|              | Average daily rate   |                  |   |            |              |      | $ | 84.80        |   |  | $        | 83.45 |   |  | $ | 83.58 |  
|              | RevPAR               |                  |   |            |              |      | $ | 56.02        |   |  | $        | 55.14 |   |  | $ | 56.39 |  

14



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##### Table of Contents



|                                 |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |        |  
|-------------------------------- | -------------------- | ---------------- |  | ---------- | ------------ | ---- | - | ------------ | - |  | -------- | ------ | - |  | - | ------ | -
|                                 |                      |                  |  | Year Ended |             
|                                 |                      |                  |  |            |             
|                                 |                      |                  |  |            |              | 2002 |  
|                                 |                      | 2004 Capital     |  |            | December 31, |      |   | December 31, |   |  | Combined |       
|                                 |                      | Expenditures     |  |            | 2004         |      |   | 2003         |   |  | Period   |       
|                                 |                      |                  |  |            |              |      |   |              |   |  |          |       
|                                 |                      | ($ in thousands) |  |            |              |      |   |              |  
|Midscale with Food & Beverage    |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 11,736     |              |      |   | 44           |   |  |          | 45     |   |  |   | 44     |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 8,623        |   |  |          | 8,921  |   |  |   | 8,528  |  
|                                 | Occupancy            |                  |  |            |              |      |   | 59.7         | % |  |          | 59.2   | % |  |   | 61.6   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 73.51        |   |  | $        | 71.57  |   |  | $ | 72.23  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 43.87        |   |  | $        | 42.35  |   |  | $ | 44.47  |  
|Midscale without Food & Beverage |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 1,700      |              |      |   | 9            |   |  |          | 9      |   |  |   | 7      |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 1,067        |   |  |          | 1,067  |   |  |   | 833    |  
|                                 | Occupancy            |                  |  |            |              |      |   | 60.0         | % |  |          | 53.9   | % |  |   | 57.6   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 60.50        |   |  | $        | 58.70  |   |  | $ | 56.54  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 36.32        |   |  | $        | 31.64  |   |  | $ | 32.55  |  
|Independent Hotels               |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 2,340      |              |      |   | 3            |   |  |          | 3      |   |  |   | 6      |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 535          |   |  |          | 535    |   |  |   | 1,162  |  
|                                 | Occupancy            |                  |  |            |              |      |   | 36.6         | % |  |          | 41.4   | % |  |   | 44.1   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 63.27        |   |  | $        | 61.98  |   |  | $ | 64.34  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 23.17        |   |  | $        | 25.64  |   |  | $ | 28.40  |  
|All Hotels                       |                      |                  |  |            |              |      |   |              |   |  |          |        |   |  |   |       
|                                 | Number of properties |                  |  | 35,161     |              |      |   | 78           |   |  |          | 78     |   |  |   | 78     |  
|                                 | Number of rooms      |                  |  |            |              |      |   | 14,350       |   |  |          | 14,350 |   |  |   | 14,350 |  
|                                 | Occupancy            |                  |  |            |              |      |   | 60.7         | % |  |          | 59.7   | % |  |   | 61.4   | %
|                                 | Average daily rate   |                  |  |            |              |      | $ | 76.57        |   |  | $        | 74.34  |   |  | $ | 74.83  |  
|                                 | RevPAR               |                  |  |            |              |      | $ | 46.51        |   |  | $        | 44.35  |   |  | $ | 45.94  |  





| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | Upper Upscale: Hilton and Marriott;                                                                                           
|
| |  | Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and
    Residence Inn by Marriott;                                     
|
| |  | Midscale with Food & Beverage: Clarion, DoubleTree,
    Four Points, Holiday Inn, Holiday Inn Select, and Quality
    Inn; and
|
| |  | Midscale without Food & Beverage: Fairfield Inn by
    Marriott and Holiday Inn Express.                                      



15



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##### Table of Contents







| |                                                                
| | ---------------------------------------------------------------
| | Combined Continuing and Discontinued
    Operations  85 hotels

|                 |                      |                  |   |            |              |      |   |              |   |  |          |        |   |  |   |        |  
|---------------- | -------------------- | ---------------- | - | ---------- | ------------ | ---- | - | ------------ | - |  | -------- | ------ | - |  | - | ------ | -
|                 |                      |                  |   | Year Ended |             
|                 |                      |                  |   |            |             
|                 |                      |                  |   |            |              | 2002 |  
|                 |                      | 2004 Capital     |   |            | December 31, |      |   | December 31, |   |  | Combined |       
|                 |                      | Expenditures     |   |            | 2004         |      |   | 2003         |   |  | Period   |       
|                 |                      |                  |   |            |              |      |   |              |   |  |          |       
|                 |                      | ($ in thousands) |   |            |              |      |   |              |  
|Northeast Region |                      |                  |   |            |              |      |   |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  | $ | 7,961      |              |      |   | 32           |   |  |          | 32     |   |  |   | 32     |  
|                 | Number of rooms      |                  |   |            |              |      |   | 6,065        |   |  |          | 6,065  |   |  |   | 6,065  |  
|                 | Occupancy            |                  |   |            |              |      |   | 62.6         | % |  |          | 63.0   | % |  |   | 64.1   | %
|                 | Average daily rate   |                  |   |            |              |      | $ | 82.66        |   |  | $        | 80.78  |   |  | $ | 79.06  |  
|                 | RevPAR               |                  |   |            |              |      | $ | 51.78        |   |  | $        | 50.85  |   |  | $ | 50.71  |  
|Southeast Region |                      |                  |   |            |              |      |   |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 15,369     |              |      |   | 28           |   |  |          | 28     |   |  |   | 28     |  
|                 | Number of rooms      |                  |   |            |              |      |   | 4,811        |   |  |          | 4,811  |   |  |   | 4,811  |  
|                 | Occupancy            |                  |   |            |              |      |   | 57.3         | % |  |          | 56.3   | % |  |   | 57.2   | %
|                 | Average daily rate   |                  |   |            |              |      | $ | 69.38        |   |  | $        | 67.18  |   |  | $ | 67.50  |  
|                 | RevPAR               |                  |   |            |              |      | $ | 39.78        |   |  | $        | 37.84  |   |  | $ | 38.63  |  
|Midwest Region   |                      |                  |   |            |              |      |   |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 3,894      |              |      |   | 18           |   |  |          | 18     |   |  |   | 18     |  
|                 | Number of rooms      |                  |   |            |              |      |   | 3,895        |   |  |          | 3,895  |   |  |   | 3,895  |  
|                 | Occupancy            |                  |   |            |              |      |   | 55.5         | % |  |          | 53.2   | % |  |   | 55.7   | %
|                 | Average daily rate   |                  |   |            |              |      | $ | 69.68        |   |  | $        | 69.38  |   |  | $ | 71.83  |  
|                 | RevPAR               |                  |   |            |              |      | $ | 38.67        |   |  | $        | 36.90  |   |  | $ | 40.04  |  
|West Region      |                      |                  |   |            |              |      |   |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 9,344      |              |      |   | 7            |   |  |          | 7      |   |  |   | 7      |  
|                 | Number of rooms      |                  |   |            |              |      |   | 1,319        |   |  |          | 1,319  |   |  |   | 1,319  |  
|                 | Occupancy            |                  |   |            |              |      |   | 62.2         | % |  |          | 62.8   | % |  |   | 64.0   | %
|                 | Average daily rate   |                  |   |            |              |      | $ | 82.17        |   |  | $        | 77.69  |   |  | $ | 79.92  |  
|                 | RevPAR               |                  |   |            |              |      | $ | 51.12        |   |  | $        | 48.79  |   |  | $ | 51.12  |  
|All Hotels       |                      |                  |   |            |              |      |   |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 36,568     |              |      |   | 85           |   |  |          | 85     |   |  |   | 85     |  
|                 | Number of rooms      |                  |   |            |              |      |   | 16,090       |   |  |          | 16,090 |   |  |   | 16,090 |  
|                 | Occupancy            |                  |   |            |              |      |   | 59.3         | % |  |          | 58.6   | % |  |   | 60.0   | %
|                 | Average daily rate   |                  |   |            |              |      | $ | 75.90        |   |  | $        | 74.10  |   |  | $ | 74.21  |  
|                 | RevPAR               |                  |   |            |              |      | $ | 45.01        |   |  | $        | 43.42  |   |  | $ | 44.54  |  

16



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| |                                  
| | ---------------------------------
| | Continuing Operations  78 hotels

|                 |                      |                  |   |            |              |  |      |              |   |  |          |        |   |  |   |        |  
|---------------- | -------------------- | ---------------- | - | ---------- | ------------ |  | ---- | ------------ | - |  | -------- | ------ | - |  | - | ------ | -
|                 |                      |                  |   | Year Ended |             
|                 |                      |                  |   |            |             
|                 |                      | 2004             |   |            |              |  | 2002 |             
|                 |                      | Capital          |   |            | December 31, |  |      | December 31, |   |  | Combined |       
|                 |                      | Expenditures     |   |            | 2004         |  |      | 2003         |   |  | Period   |       
|                 |                      |                  |   |            |              |  |      |              |   |  |          |       
|                 |                      | ($ in thousands) |   |            |              |  |      |              |  
|Northeast Region |                      |                  |   |            |              |  |      |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  | $ | 6,675      |              |  |      | 28           |   |  |          | 28     |   |  |   | 28     |  
|                 | Number of rooms      |                  |   |            |              |  |      | 5,155        |   |  |          | 5,155  |   |  |   | 5,155  |  
|                 | Occupancy            |                  |   |            |              |  |      | 65.0         | % |  |          | 64.3   | % |  |   | 66.3   | %
|                 | Average daily rate   |                  |   |            |              |  | $    | 84.26        |   |  | $        | 81.76  |   |  | $ | 81.09  |  
|                 | RevPAR               |                  |   |            |              |  | $    | 54.73        |   |  | $        | 52.57  |   |  | $ | 53.76  |  
|Southeast Region |                      |                  |   |            |              |  |      |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 15,313     |              |  |      | 27           |   |  |          | 27     |   |  |   | 27     |  
|                 | Number of rooms      |                  |   |            |              |  |      | 4,613        |   |  |          | 4,613  |   |  |   | 4,613  |  
|                 | Occupancy            |                  |   |            |              |  |      | 57.8         | % |  |          | 56.8   | % |  |   | 57.8   | %
|                 | Average daily rate   |                  |   |            |              |  | $    | 69.13        |   |  | $        | 67.12  |   |  | $ | 67.42  |  
|                 | RevPAR               |                  |   |            |              |  | $    | 39.95        |   |  | $        | 38.15  |   |  | $ | 38.96  |  
|Midwest Region   |                      |                  |   |            |              |  |      |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 3,829      |              |  |      | 16           |   |  |          | 16     |   |  |   | 16     |  
|                 | Number of rooms      |                  |   |            |              |  |      | 3,263        |   |  |          | 3,263  |   |  |   | 3,263  |  
|                 | Occupancy            |                  |   |            |              |  |      | 57.5         | % |  |          | 55.0   | % |  |   | 57.7   | %
|                 | Average daily rate   |                  |   |            |              |  | $    | 70.63        |   |  | $        | 69.67  |   |  | $ | 71.67  |  
|                 | RevPAR               |                  |   |            |              |  | $    | 40.62        |   |  | $        | 38.33  |   |  | $ | 41.35  |  
|West Region      |                      |                  |   |            |              |  |      |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 9,344      |              |  |      | 7            |   |  |          | 7      |   |  |   | 7      |  
|                 | Number of rooms      |                  |   |            |              |  |      | 1,319        |   |  |          | 1,319  |   |  |   | 1,319  |  
|                 | Occupancy            |                  |   |            |              |  |      | 62.2         | % |  |          | 62.8   | % |  |   | 64.0   | %
|                 | Average daily rate   |                  |   |            |              |  | $    | 82.17        |   |  | $        | 77.69  |   |  | $ | 79.92  |  
|                 | RevPAR               |                  |   |            |              |  | $    | 51.12        |   |  | $        | 48.79  |   |  | $ | 51.12  |  
|All Hotels       |                      |                  |   |            |              |  |      |              |   |  |          |        |   |  |   |       
|                 | Number of properties |                  |   | 35,161     |              |  |      | 78           |   |  |          | 78     |   |  |   | 78     |  
|                 | Number of rooms      |                  |   |            |              |  |      | 14,350       |   |  |          | 14,350 |   |  |   | 14,350 |  
|                 | Occupancy            |                  |   |            |              |  |      | 60.7         | % |  |          | 59.7   | % |  |   | 61.4   | %
|                 | Average daily rate   |                  |   |            |              |  | $    | 76.57        |   |  | $        | 74.34  |   |  | $ | 74.83  |  
|                 | RevPAR               |                  |   |            |              |  | $    | 46.51        |   |  | $        | 44.35  |   |  | $ | 45.94  |  





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

17



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



|                                                              |  |           |    |                   |                     |   |         |                |  |   |         |  
|------------------------------------------------------------- |  | --------- | -- | ----------------- | ------------------- | - | ------- | -------------- |  | - | ------- | -
|                                                              |  |           |    | December 31, 2004 |                    
|                                                              |  |           |    |                   |                    
|                                                              |  | Number    |    |                   | Property, Plant and |   |         | Debt           | 
|                                                              |  | of Hotels |    |                   | Equipment, net(1)   |   |         | Obligations(1) | 
|                                                              |  |           |    |                   |                     |   |         |                | 
|                                                              |  |           |    | ($ in thousands)  |                    
|Refinancing Debt                                              |  |           |    |                   |                     |   |         |                |  |   |         |  
|Merrill Lynch Mortgage Lending, Inc.  Floating               |  |           | 26 |                   |                     | $ | 114,925 |                |  | $ | 102,617 |  
|Merrill Lynch Mortgage Lending, Inc.  Fixed                  |  |           | 35 |                   |                     |   | 315,317 |                |  |   | 258,410 |  
|                                                              |  |           |    |                   |                     |   |         |                | 
|Merrill Lynch Mortgage Lending, Inc.  Total                  |  |           | 61 |                   |                     |   | 430,242 |                |  |   | 361,027 |  
|Computershare Trust Company of Canada                         |  |           | 1  |                   |                     |   | 15,907  |                |  |   | 7,843   |  
|Other Financing                                               |  |           |    |                   |                     |   |         |                |  |   |         |  
|Column Financial, Inc.                                        |  |           | 9  |                   |                     |   | 65,704  |                |  |   | 25,058  |  
|Lehman Brothers Holdings, Inc.                                |  |           | 5  |                   |                     |   | 37,131  |                |  |   | 22,927  |  
|JP Morgan Chase Bank, Trustee                                 |  |           | 2  |                   |                     |   | 7,884   |                |  |   | 10,110  |  
|DDL Kinser                                                    |  |           | 1  |                   |                     |   | 3,123   |                |  |   | 2,286   |  
|Column Financial, Inc.                                        |  |           | 1  |                   |                     |   | 11,544  |                |  |   | 8,545   |  
|Column Financial, Inc.                                        |  |           | 1  |                   |                     |   | 5,984   |                |  |   | 3,069   |  
|                                                              |  |           |    |                   |                     |   |         |                | 
|Total  Other Financing                                       |  |           | 19 |                   |                     |   | 131,370 |                |  |   | 71,995  |  
|                                                              |  |           |    |                   |                     |   |         |                | 
|                                                              |  |           | 81 |                   |                     |   | 577,519 |                |  |   | 440,865 |  
|Long-term debt  other                                        |  |           |    |                   |                     |   |         |                |  |   |         |  
|Tax notes issued pursuant to our Joint Plan of Reorganization |  |           |   |                   |                     |   |        |                |  |   | 3,302   |  
|Other                                                         |  |           |   |                   |                     |   |        |                |  |   | 1,865   |  
|                                                              |  |           |    |                   |                     |   |         |                | 
|                                                              |  |           |   |                   |                     |   |        |                |  |   | 5,167   |  
|Property, plant and equipment  unencumbered                  |  |           | 4  |                   |                     |   | 20,059  |                |  |   |        |  
|                                                              |  |           |    |                   |                     |   |         |                | 
|                                                              |  |           | 85 |                   |                     |   | 597,578 |                |  |   | 446,032 |  
|Held for sale(2)                                              |  |           | (7 | )                 |                     |   | (28,207 | )              |  |   | (27,599 | )
|                                                              |  |           |    |                   |                     |   |         |                | 
|Total December 31, 2004(3)                                    |  |           | 78 |                   |                     | $ | 569,371 |                |  | $ | 418,433 |  
|                                                              |  |           |    |                   |                     |   |         |                | 






|    |                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Debt obligations and property, plant and equipment, net of one
    hotel in which we have a non-controlling equity interest that we
    do not consolidate are excluded from the table above.                                                                                         
|   
|(2) | Between January 1, 2005 and March 1, 2005, we sold two
    hotels held for sale at December 31, 2004 for gross sales
    proceeds of $7.1 million. The net proceeds of the sale,
    after deducting liquidated damages, were $6.5 million all
    of which was used to pay down debt.
|   
|(3) | Debt obligation amounts at December 31, 2004 include the
    current portion.                                                                                                                                                                                                         

Insurance






| |   |                   
| | - | ------------------
| |  | general liability;
|
| |  | property damage;  

18



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| |   |                                           
| | - | ------------------------------------------
| |  | directors and officers liability;       
|
| |  | liquor liability;                         
|
| |  | workers compensation;                    
|
| |  | fiduciary liability;                      
|
| |  | business automobile;                      
|
| |  | environmental (on certain properties); and
|
| |  | employment practices liability insurance. 







Regulation










Employees




19



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Legal Proceedings




SEC Filings and Financial Information








Factors Which May Affect Future Results






| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The effects of regional, national and international economic
    conditions;                                                                                                             
|
| |  | Competitive conditions in the lodging industry and increases in
    room capacity;                                                                                                       
|
| |  | The effects of actual and threatened terrorist attacks and
    international conflicts in Iraq, the Middle East and elsewhere,
    and their impact on domestic and international travel;
|
| |  | The effectiveness of changes in management, and our ability to
    retain qualified individuals to serve in senior management
    positions;                                             

20



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| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Requirements of franchise agreements, including the right of
    franchisors to immediately terminate their respective agreements
    if we breach certain provisions;                                            
|
| |  | Our ability to complete planned hotel and land parcel
    dispositions;                                                                                                                                           
|
| |  | Seasonality of the hotel business;                                                                                                                                                                                
|
| |  | The effects of unpredictable weather events such as hurricanes;                                                                                                                                                   
|
| |  | The financial condition of the airline industry and its impact
    on air travel;                                                                                                                                 
|
| |  | The effect that Internet reservation channels may have on the
    rates that we are able to charge for hotel rooms;                                                                                               
|
| |  | Increases in the cost of debt and our continued compliance with
    the terms of our loan agreements;                                                                                                             
|
| |  | The effect of the majority of our assets being encumbered on our
    borrowings and future growth;                                                                                                                
|
| |  | Our ability to meet the continuing listing requirements of the
    Securities and Exchange Commission and the American Stock
    Exchange;                                                                        
|
| |  | The effect of self-insured claims in excess of our reserves, or
    our ability to obtain adequate property and liability insurance
    to protect against losses, or to obtain insurance at reasonable
    rates;
|
| |  | Potential litigation and/or governmental inquiries and
    investigations;                                                                                                                                        
|
| |  | Laws and regulations applicable to our business, including
    federal, state or local hotel, resort, restaurant or land use
    regulations, employment, labor or disability laws and
    regulations;           
|
| |  | The short time that the public market for our new securities has
    existed; and                                                                                                                                 
|
| |  | The risks identified below under Risks Related to Our
    Business and Risks Relating to Our Common
    Stock.                                                                                                





Risks Related to Our Business




| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to meet the requirements imposed by our
    franchisors in our franchise agreements and therefore could lose
    the right to operate one or more hotels under a national
    brand.





21



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







22



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





| |                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Most of our hotels are pledged as collateral for mortgage
    loans, and we have a significant amount of debt that could limit
    our operational flexibility or otherwise adversely affect our
    financial condition.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We may not be able to repay or refinance our maturing
    indebtedness on favorable terms or at all. If we are unable to
    refinance or extend the maturity of our maturing indebtedness,
    we may not otherwise be able to repay such indebtedness. Debt
    defaults could lead us to sell one or more of our hotels on
    unfavorable terms or, in the case of secured debt, to convey the
    mortgaged hotel(s) to the lender, causing a loss of any
    anticipated income and cash flow from, and our invested capital
    in, such hotel(s);
|
| |  | 81 of our consolidated hotels are pledged as collateral for
    existing mortgage loans as of December 31, 2004, which
    represented 97% of the book value of our hotel property, plant
    and equipment, net, as of December 31, 2004, and, as a
    result, we have limited flexibility to sell our hotels to
    satisfy cash needs;                                                                                                                                                                                                               
|
| |  | Increased vulnerability to downturns in our business, the
    lodging industry and the general economy;                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Our ability to obtain other financing to fund future working
    capital, capital expenditures and other general corporate
    requirements may be limited;                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Our cash flow from operations may be insufficient to make
    required debt service payments, and we may be required to
    dedicate a substantial portion of our cash flow from operations
    to debt service payments, reducing the availability of our cash
    flow to fund working capital, capital expenditures, and other
    needs and placing us at a competitive disadvantage with other
    companies that have greater resources and/or less debt; and                                                                                      

23



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| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our flexibility in planning for, or reacting to, changes in our
    business and industry may be restricted, placing us at a
    competitive disadvantage to our competitors with greater
    financial strength than we have.



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









24



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





| |                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To service our indebtedness, we require a significant
    amount of cash. Our ability to generate cash depends on many
    factors beyond our control and a cash shortfall could adversely
    affect our ability to fund our operations, planned capital
    expenditures and other needs.





| |   |                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Dependence on business and leisure travelers, which have been
    and continue to be affected by threats of terrorism, or other
    outbreaks of hostilities, and new laws to counter terrorism
    which results in some degree of restriction on foreign travelers
    visiting the U.S.;
|
| |  | Cyclical overbuilding in the lodging industry;                                                                                                                                                                                                                                             
|
| |  | Varying levels of demand for rooms and related services;                                                                                                                                                                                                                                   
|
| |  | Competition from other hotels, motels and recreational
    properties, some of which may be owned or operated by companies
    having greater marketing and financial resources than we have;                                                                                              
|
| |  | Effects of economic and market conditions;                                                                                                                                                                                                                                                 
|
| |  | Decreases in air travel;                                                                                                                                                                                                                                                                   
|
| |  | Fluctuations in operating costs;                                                                                                                                                                                                                                                           

25



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| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | Changes in governmental laws and regulations that influence or
    determine wages or required remedial expenditures;
|
| |  | Changes in interest rates and in the availability, cost and
    terms of credit; and                                 
|
| |  | The perception of the lodging industry and companies in the debt
    and equity markets.                             



| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | The value of our hotels and our ability to repay or
    refinance our debt are dependent upon the successful operation
    and cash flows of the hotels.







| |   |                                                   
| | - | --------------------------------------------------
| |  | general market conditions;                        
|
| |  | the markets perception of our growth potential;  
|
| |  | our current debt levels and property encumbrances;
|
| |  | our current and expected future earnings;         
|
| |  | our cash flow and cash needs; and                 
|
| |  | the market price per share of our common stock.   



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



26



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





| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Fresh start reporting will make future financial
    statements difficult to compare.





| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Our prior bankruptcy proceedings could adversely affect
    our operations going forward.





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



27



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| |                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Acts and threats of terrorism, the ongoing war against
    terrorism, military conflicts and other factors have had and may
    continue to have a negative effect on the lodging industry and
    our results of operations.





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





| |                                                                           
| | --------------------------------------------------------------------------
| | Our expenses may remain constant or increase even if
    revenues decline.





| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rising interest rates;                                                                                                                                                            
|
| |  | Tightening of funding available to the lodging industry on
    favorable terms, or at all;                                                                                        
|
| |  | Increase in labor and related costs; and                                                                                                                                          
|
| |  | Changes in, and as a result, increases in the cost of compliance
    with new government regulations, including those governing,
    environmental, usage, zoning and tax matters.



| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | We may make acquisitions or investments that are not
    successful and that adversely affect our ongoing
    operations.



28



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| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Significant errors or miscalculations in identifying suitable
    acquisition or investment candidates, performing appropriate due
    diligence, identifying potential liabilities and negotiating
    favorable terms;
|
| |  | Reducing our working capital and hindering our ability to expand
    or maintain our business, including making capital expenditures
    and funding operations;                                                        
|
| |  | The potential distraction of our management, diversion of our
    resources and disruption of our business;                                                                                                             
|
| |  | Overpaying by competing for acquisition opportunities with
    resourceful and cash-rich competitors;                                                                                                                   
|
| |  | Inaccurate forecasting of the financial impact of an acquisition
    or investment; and                                                                                                                                 
|
| |  | Failure to effectively integrate acquired companies or
    investments into our company and achieving expected synergies.                                                                                               



| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | Losses may exceed our insurance coverage or estimated
    reserves, which could impair our results of operations,
    financial condition and liquidity.







| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | the insurance coverages that we have obtained will fully protect
    us against insurable losses (i.e., losses may exceed coverage
    limits);
|
| |  | we will not incur losses from risks that are not insurable or
    that are not economically insurable; or                                      
|
| |  | current coverages will continue to be available at reasonable
    rates.                                                                       







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



29



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##### Table of Contents







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





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





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





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





| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Our success is dependent on recruiting and retaining high
    caliber key personnel.





| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | The increasing use of third-party travel websites by
    consumers may adversely affect our profitability.



30



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##### Table of Contents







| |                                                                             
| | ----------------------------------------------------------------------------
| | We may be unable to utilize all of our net operating loss
    carryforwards.





| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Many aspects of our operations are subject to government
    regulations, and changes in these regulations may adversely
    affect our results of operations and financial condition.





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











31



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##### Table of Contents









Risks Related to Our Common Stock




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





| |                                 
| | --------------------------------
| | Our stock price may be volatile.





| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Actual or anticipated variations in our results of operations;                                                                                                                                                  
|
| |  | Announcements of new services or products or significant price
    reductions by us or our competitors;                                                                                                         
|
| |  | Market performance by our competitors;                                                                                                                                                                          
|
| |  | Future issuances of our common stock, or securities convertible
    into or exchangeable or exercisable for our common stock, by us
    directly, or the perception that such issuances are likely to
    occur;
|
| |  | Sales of our common stock by stockholders or the perception that
    such sales may occur in the future;                                                                                                        
|
| |  | The size of our market capitalization;                                                                                                                                                                          
|
| |  | Loss of our franchises;                                                                                                                                                                                         
|
| |  | Default on our indebtedness and/or foreclosure of our properties;                                                                                                                                               
|
| |  | Changes in financial estimates by securities analysts; and                                                                                                                                                      
|
| |  | Domestic and international economic, legal and regulatory
    factors unrelated to our performance.                                                                                                             

32



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##### Table of Contents





| |                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may never pay dividends on our common stock, in which
    event our stockholders only return on their investment, if
    any, will occur on the sale of our common stock.





| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our charter documents, employment contracts and Delaware
    law may impede attempts to replace or remove our management or
    inhibit a takeover, which could adversely affect the value of
    our common stock.





| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Authorizing the issuance of preferred stock, the terms of which
    may be determined at the sole discretion of the board of
    directors;                                           
|
| |  | Establishing advance notice requirements for nominations for
    election to the board of directors or for proposing matters that
    can be acted on by stockholders at meetings; and
|
| |  | Requiring all stockholder action to be taken at a duly called
    meeting, not by written consent.                                                                                    








|        |           
|------- | ----------
|Item 2. | Properties








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








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






PART II







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

Historical Data






33



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##### Table of Contents





|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | 2003 |      
|               |  |      |      
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|First Quarter  |  | $    | 15.75 |  |     | $ | 8.85  | 
|Second Quarter |  |      | 10.23 |  |     |   | 7.71  | 
|Third Quarter  |  |      | 17.25 |  |     |   | 8.85  | 
|Fourth Quarter |  |      | 27.75 |  |     |   | 15.27 | 

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

|                                    |  |      |       |  |     |   |       | 
|----------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|                                    |  | 2005 |      
|                                    |  |      |      
|                                    |  | High |       |  | Low |  
|                                    |  |      |       |  |     |  
|First Quarter (up to March 1, 2005) |  | $    | 12.03 |  |     | $ | 11.37 | 












34



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Equity Compensation Plan Information




|                                                           |  |                      |         |           |                   |           |                      |                      |  |  |           | 
|---------------------------------------------------------- |  | -------------------- | ------- | --------- | ----------------- | --------- | -------------------- | -------------------- |  |  | --------- | 
|                                                           |  |                      |         |           |                   | Number of |                     
|                                                           |  |                      |         | Weighted- |                   |           | Securities Remaining |                     
|                                                           |  | Number of            |         |           | 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))       | 
|                                                           |  | (a)                  |         |           | (b)               |           |                      | (c)                  | 
|                                                           |  |                      |         |           |                   |           |                      |                      | 
|Equity compensation plans approved by security holders*    |  |                      | 526,410 |           |                   | $         | 11.46                |                      |  |  | 2,355,876 | 
|Equity compensation plans not approved by security holders |  |                      |        |           |                   |           |                     |                      |  |  |          | 






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | At our 2004 annual meeting the stockholders approved an increase
    in the number of shares available for issuance by
    29,667 shares (adjusted for the 1:3 reverse stock split)
    for an aggregate of 383,000 (adjusted for the 1:3 reverse stock
    split) and, in the event we consummated a firm commitment,
    underwritten public offering of our common stock, by an
    additional amount to be determined pursuant to a formula. With
    the effective date of our public offering of common stock on
    June 25, 2004, the total number of shares available for
    issuance under our Stock Incentive Plan increased to
    2,950,832 shares. In addition to the issuance of options to
    acquire 526,907 options (out of which options for
    497 shares were exercised), we have issued 68,048
    restricted stock shares under the plan.





|                                             |  |                |         |   |      |               |                     |                |  |  |           | 
|-------------------------------------------- |  | -------------- | ------- | - | ---- | ------------- | ------------------- | -------------- |  |  | --------- | 
|                                             |  |                |         |   |      | Available for |                    
|                                             |  | Issued Under   |         |   |      |               | Issuance Under      |               
|                                             |  | the Stock      |         |   |      |               | the Stock           |               
|                                             |  | Incentive Plan |         |   | Type |               |                     | Incentive Plan | 
|                                             |  |                |         |   |      |               |                     |                | 
|Available under plan, less previously issued |  |                |         |   |      |               |                     |                |  |  | 2,726,380 | 
|Issued  April 9, 2004                       |  |                | 1,382   |   |      |               | (1)restricted stock |                |  |  | 2,724,998 | 
|Issued  June 25, 2004                       |  |                | 383,500 |   |      |               | (2)stock option     |                |  |  | 2,341,498 | 
|Options forfeited in 2004                    |  |                | (14,378 | ) |      |               |                     |                |  |  | 2,355,876 | 
|                                             |  |                |         |   |      |               |                     |                | 
|                                             |  |                | 370,504 |   |      |               |                     |                |  |  |           | 
|                                             |  |                |         |   |      |               |                     |                | 






|    |                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On April 9, 2004, we issued to our CEO, Thomas Parrington,
    1,382 restricted stock units in accordance with his employment
    agreement. The restricted stock units vest on April 9, 2005
    when they will be convertible into an equal number of shares of
    common stock.

35



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##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | On June 25, 2004, our compensation committee awarded stock
    options to acquire 383,500 shares of our common stock to
    certain of our employees and to members of our audit committee.
    Each of the three members of our audit committee received
    non-qualified options to acquire 5,000 shares of our common
    stock. The exercise price of the awards granted was $10.52, the
    average of the high and low market prices of the share on the
    day of the grant, and the shares vest in three equal annual
    installments beginning on June 25, 2005.






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

Selected Consolidated Financial Data










|                                                  |  |                                         |         |                 |             |   |               |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|------------------------------------------------- |  | --------------------------------------- | ------- | --------------- | ----------- | - | ------------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---- | - | -------- | - |  | - | ------- | -
|                                                  |  | ($ in thousands, except per share data) |        
|                                                  |  | Successor                               |         |                 | Predecessor |  
|                                                  |  |                                         |         |                 |             |  
|                                                  |  |                                         |         | November 23,    |             |   | January 1, to |      |  |  
|                                                  |  |                                         |         | to December 31, |             |   | November 22,  |      |  |  
|                                                  |  | 2004                                    |         |                 | 2003        |   |               | 2002 |  |   | 2002    |   |  | 2001 |         |   | 2000 |  
|                                                  |  |                                         |         |                 |             |   |               |      |  |   |         |   |  |      |         |   |      |  
|Income statement data:                            |  |                                         |         |                 |             |   |               |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Revenues  continuing operations                  |  | $                                       | 322,109 |                 |             | $ | 311,414       |      |  | $ | 25,306  |   |  | $    | 299,267 |   |      | $ | 351,072  |   |  | $ | 468,271 |  
|Revenues  discontinued operations                |  |                                         | 38,199  |                 |             |   | 61,137        |      |  |   | 6,441   |   |  |      | 78,757  |   |      |   | 96,484   |   |  |   | 112,626 |  
|Revenues  continuing and discontinued operations |  |                                         | 360,308 |                 |             |   | 372,551       |      |  |   | 31,747  |   |  |      | 378,024 |   |      |   | 447,556  |   |  |   | 580,897 |  
|(Loss) income  continuing operations             |  |                                         | (35,846 | )               |             |   | (27,074       | )    |  |   | (6,745  | ) |  |      | 16,999  |   |      |   | (87,537  | ) |  |   | (91,025 | )
|(Loss) income  discontinued operations           |  |                                         | 4,012   |                 |             |   | (4,603        | )    |  |   | (2,581  | ) |  |      | (4,633  | ) |      |   | (55,227  | ) |  |   | 3,070   |  
|Net (loss) income                                 |  |                                         | (31,834 | )               |             |   | (31,677       | )    |  |   | (9,326  | ) |  |      | 12,366  |   |      |   | (142,764 | ) |  |   | (87,955 | )
|Net (loss) income attributable to common stock    |  |                                         | (31,834 | )               |             |   | (39,271       | )    |  |   | (10,836 | ) |  |      | 12,366  |   |      |   | (142,764 | ) |  |   | (87,955 | )

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|                                                                                                         |                                                       |                                         |         |                 |             |   |               |        |   |   |         |       |   |      |         |       |      |   |         |       |   |   |           |       |  
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------------------------- | ------- | --------------- | ----------- | - | ------------- | ------ | - | - | ------- | ----- | - | ---- | ------- | ----- | ---- | - | ------- | ----- | - | - | --------- | ----- | -
|                                                                                                         |                                                       | ($ in thousands, except per share data) |        
|                                                                                                         |                                                       | Successor                               |         |                 | Predecessor |  
|                                                                                                         |                                                       |                                         |         |                 |             |  
|                                                                                                         |                                                       |                                         |         | November 23,    |             |   | January 1, to |        |   |  
|                                                                                                         |                                                       |                                         |         | to December 31, |             |   | November 22,  |        |   |  
|                                                                                                         |                                                       | 2004                                    |         |                 | 2003        |   |               | 2002   |   |   | 2002    |       |   | 2001 |         |       | 2000 |  
|                                                                                                         |                                                       |                                         |         |                 |             |   |               |        |   |   |         |       |   |      |         |       |      |  
|(Loss) income from continuing operations attributable to common
    stock before discontinued operations |                                                       |                                         | (35,846 | )               |             |   | (34,668       | )      |   |   | (8,255  | )     |   |      | 16,999  |       |      |   | (87,537 | )     |   |   | (91,025   | )    
|Earnings per common share, basic and diluted:                                                            |                                                       |                                         |         |                 |             |   |               |        |   |   |         |       |   |      |         |       |      |   |         |       |   |   |           |      
|                                                                                                         | (Loss) income  continuing operations                 |                                         |         | (2.59           | )           |   |               | (11.60 | ) |   |         | (2.89 | ) |      |         | 0.60  |      |   |         | (3.09 | ) |   |           | (3.23 | )
|                                                                                                         | Income (loss)  discontinued operations, net of taxes |                                         |         | 0.29            |             |   |               | (1.98  | ) |   |         | (1.11 | ) |      |         | (0.17 | )    |   |         | (1.95 | ) |   |           | 0.11  |  
|                                                                                                         | Net (loss) income                                     |                                         |         | (2.30           | )           |   |               | (13.58 | ) |   |         | (4.00 | ) |      |         | 0.43  |      |   |         | (5.04 | ) |   |           | (3.12 | )
|                                                                                                         | Net (loss) income attributable to common stock        |                                         |         | (2.30           | )           |   |               | (16.83 | ) |   |         | (4.64 | ) |      |         | 0.43  |      |   |         | (5.04 | ) |   |           | (3.12 | )
|(Loss) income from continuing operations attributable to common
    stock before discontinued operations |                                                       |                                         | (2.59   | )               |             |   | (14.86        | )      |   |   | (3.54   | )     |   |      | 0.60    |       |      |   | (3.09   | )     |   |   | (3.23     | )    
|Basic and diluted weighted average shares(1)                                                             |                                                       |                                         | 13,817  |                 |             |   | 2,333         |        |   |   | 2,333   |       |   |      | 28,480  |       |      |   | 28,350  |       |   |   | 28,186    |      
|Balance sheet data (at period end):                                                                      |                                                       |                                         |         |                 |             |   |               |        |   |   |         |       |   |      |         |       |      |   |         |       |   |   |           |      
|Total assets                                                                                             |                                                       | $                                       | 723,307 |                 |             | $ | 709,174       |        |   | $ | 762,164 |       |   | $    | 967,131 |       |      | $ | 975,362 |       |   | $ | 1,160,344 |      
|Assets held for sale                                                                                     |                                                       |                                         | 30,528  |                 |             |   | 68,567        |        |   |   |        |       |   |      |        |       |      |   |        |       |   |   |          |      
|Long-term debt(2)                                                                                        |                                                       | $                                       | 393,143 |                 |             |   | 551,292       |        |   |   | 389,752 |       |   |      | 7,215   |       |      |   | 7,652   |       |   |   | 674,038   |      
|Liabilities related to assets held for sale                                                              |                                                       |                                         | 30,541  |                 |             |   | 57,948        |        |   |   |        |       |   |      |        |       |      |   |        |       |   |   |          |      
|Liabilities subject to compromise(2)                                                                     |                                                       |                                         |        |                 |             |   |              |        |   |   | 93,816  |       |   |      | 926,387 |       |      |   | 925,894 |       |   |   |          |      
|Mandatorily redeemable 12.25% cumulative Series A preferred
    stock(3)                                 |                                                       |                                         |        |                 |             |   |              |        |   |   | 126,510 |       |   |      |        |       |      |   |        |       |   |   |          |      
|Total liabilities                                                                                        |                                                       |                                         | 495,044 |                 |             |   | 666,248       |        |   |   | 553,581 |       |   |      | 990,682 |       |      |   | 982,043 |       |   |   | 1,027,067 |      
|Total liabilities and preferred stock                                                                    |                                                       |                                         | 495,044 |                 |             |   | 666,248       |        |   |   | 680,091 |       |   |      | 990,682 |       |      |   | 982,043 |       |   |   | 1,027,067 |      
|Total stockholders equity (deficit)                                                                     |                                                       |                                         | 226,634 |                 |             |   | 40,606        |        |   |   | 78,457  |       |   |      | (28,841 | )     |      |   | (6,681  | )     |   |   | 136,880   |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The number of shares in the Successor period ended
    December 31, 2002, represents the new shares issued on the
    effective date of the plan of reorganization in
    November 25, 2002. The 28,479,837 old shares were cancelled
    and 2,333,333 million new shares (on a post reverse stock
    split basis) were issued, including the shares held in the
    disputed claims reserve.                                                                                                                                                           
|   
|(2) | Reported long-term debt was impacted in 2001 by our filing for
    Chapter 11. On filing for Chapter 11, all our debts
    (except the debt relating to a non-filed entity), and certain
    other liabilities were classified as liabilities subject to
    compromise. On emergence from Chapter 11, some of our debt
    was discharged. The remaining long-term debt and other settled
    claims were re-classified out of liabilities subject to
    compromise to long-term debt (if long-term) and current
    liabilities (if short-term).       
|   
|(3) | The Preferred Stock was issued on November 25, 2002. At
    December 31, 2002, the Preferred Stock was classified
    between long-term debt and equity on the Consolidated Balance
    Sheet, called the mezzanine section. In accordance with
    Statement of Financial Accounting Standards (SFAS)
    No. 150 which was effective on July 1, 2003, we
    reclassified the Preferred Stock to long-term debt. The
    Preferred Stock outstanding at December 31, 2003 was
    $142.2 million, compared to $126.5 million at
    December 31, 2002.

37



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##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In addition, dividends for the applicable periods from
    July 1, 2003 to June 30, 2004 were reported in
    interest expense. In accordance with SFAS No. 150, we
    continued to show the dividends for the periods from
    January 1, 2003 to June 30, 2003 and from
    November 23, 2002 to December 31, 2002 as deductions
    from retained earnings. On June 25, 2004, we converted
    1,483,558 shares of Preferred Stock to
    3,941,115 shares of our common stock, and, on July 26,
    2004, we redeemed the balance of 4,048,183 shares of
    Preferred Stock from the proceeds of the public equity offering.






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

You should read the discussion below in conjunction with the
consolidated financial statements and accompanying notes. Also,
the discussion which follows contains forward-looking statements
which involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these
forward-looking statements as a result of various factors,
including those discussed below under Factors Which May
Affect Future Results.


Executive Summary






| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | 79 hotels that we wholly own and operate through subsidiaries;                                                               
|
| |  | four hotels that we operate in joint ventures in which we have a
    50% or greater equity interest and exercise control; and
|
| |  | one hotel that we operate in a joint venture in which we have a
    30% non-controlling equity interest.                     











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

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Operating Summary






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenues increased in 2004 due to improved performance in
    occupancy and ADR. Revenues for 2004 were negatively affected by
    the rooms that were displaced by our renovation program and the
    impact of two hotels that have been closed since September 2004
    for hurricane repairs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Direct and other hotel operating expenses increased due to
    increased revenues and the corresponding increase in variable
    expenses such as franchise fees that increase with revenues.
    Additionally, utility costs increased due to usage and rate
    increases, maintenance and repairs costs increased as we
    increased our focus on maintaining our hotels, and advertising
    and promotion costs increased as we focused our marketing
    efforts on repositioning our hotels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Interest expense increased in 2004 primarily due to costs
    associated with our mortgage refinance, including higher
    interest expense as we refinanced a significant portion of our
    debt from variable rate debt to fixed rate debt, the deferred
    loan costs that were written off for the debt that was
    extinguished, prepayment penalties on the debt was extinguished
    and the 4% prepayment premium on the Preferred Stock shares
    either converted to common stock immediately following the
    effective date of our equity offering or redeemed in cash on
    July 26, 2004. Additionally, in 2003, while certain hotels
    were in Chapter 11, we did not pay interest as approved by
    the Bankruptcy Court.                                                                                                                                                                                                                        
|
| |  | During 2004, we analyzed our assets held for use for conditions
    of impairment and, where appropriate, recorded impairment
    charges where the carrying values exceeded their estimated fair
    values. Our analysis included such factors as cash flow,
    negative demographic or economic factors in each market,
    increased guest room supply in each market, and vehicular access
    to our hotels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | During 2004, our financial results were significantly affected
    by the hurricanes that hit the Southeastern United States in
    August and September. Eight hotels were damaged by the
    hurricanes. Six of these eight hotels received extensive damage
    during the 2004 hurricane season. Our eleventh and sixteenth
    highest revenue generating hotels in 2003 were severely damaged
    by two different hurricanes. These two hotels were closed in
    September for hurricane renovation and, as of March 1,
    2005, these hotels remain closed. These hotels are expected to
    reopen in the third quarter of 2005. We incurred clean up costs
    related to these storms, lost revenues and profits, and will
    incur significant capital to repair these assets. While we do
    have business interruption insurance we have not recorded any of
    the proceeds expected to be realized on these claims in our 2004
    financial results.

Discontinued Operations






39



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Critical Accounting Policies and Estimates




Consolidation policy






Deferral policy


40



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Asset impairment








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





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Reorganization items


Accrual of self-insured obligations


Income Statement Overview








| |         
| | --------
| | Revenues





| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | Room revenues  derived from guest room rentals;                                                                               
|
| |  | Food and beverage revenues  derived from hotel
    restaurants, room service, hotel catering and meeting room
    rentals; and

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| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Other revenues  derived from guests
    long-distance telephone usage, laundry services, parking
    services, in-room movie services, vending machine commissions,
    leasing of hotel space and other miscellaneous revenues.







| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Occupancy  computed by dividing total room nights
    sold by the total available room nights;                                                                                                
|
| |  | Average Daily Rate (ADR)  computed by dividing total
    room revenues by total room nights sold; and                                                                                         
|
| |  | Revenue per available room (RevPAR)  computed by
    dividing total room revenues by total available room nights.
    RevPAR can also be obtained by multiplying the occupancy by the
    ADR.







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





| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Direct expenses  these expenses tend to vary with
    available rooms and occupancy. However, hotel level expenses
    contain significant elements of fixed costs and, therefore, do
    not decline proportionately with revenues. Direct expenses are
    further categorized as follows:



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | Room expenses  expenses incurred in generating room
    revenues;                                                    
|
| |  | Food and beverage expenses  expenses incurred in
    generating food and beverage revenues; and                      
|
| |  | Other direct expenses  expenses incurred in
    generating the revenue activities classified in other
    revenues.



| |   |                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Other hotel operating expenses  these expenses
    include salaries for hotel management, advertising and
    promotion, franchise fees, repairs and maintenance and utilities.                                                                                                                   
|
| |  | Property and other taxes, insurance and leases  these
    expenses include equipment, ground and building rentals,
    insurance, and property, franchise and other taxes.                                                                                                                        
|
| |  | Corporate and other  these expenses include corporate
    salaries and benefits, legal, accounting and other professional
    fees, directors fees, costs for office space and
    information technology costs. Also included are expenses
    relating to post-emergence Chapter 11 activities.
|
| |  | Depreciation and amortization  depreciation of fixed
    assets (primarily hotel assets) and amortization of deferred
    franchise fees.                                                                                                                                                         
|
| |  | Impairment charges  charges which were required to
    write-down the carrying values of long-term assets to their fair
    values.                                                                                                                                                               

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| |                    
| | -------------------
| | Non-operating items





| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Interest expense, preferred stock dividends, loss on preferred
    stock redemption and amortization of deferred loan fees;                           
|
| |  | Gain on disposal of assets;                                                                                                                           
|
| |  | Interest income;                                                                                                                                      
|
| |  | Our 30% share of the income or loss of our non-controlling
    equity interest in one hotel, for which we account for under the
    equity method; and



| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | Minority interests  our equity partners share
    of the income or loss of the four hotels owned by joint ventures
    that we consolidate.

Results of Operations  Continuing Operations




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2004 Compared to the Year
    Ended December 31, 2003



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

|                           |                   |      |       |         |      |   |       |                     |  |   |      |        |   |  |     |      |   
|-------------------------- | ----------------- | ---- | ----- | ------- | ---- | - | ----- | ------------------- |  | - | ---- | ------ | - |  | --- | ---- | --
|                           |                   | 2004 |       |         | 2003 |   |       | Increase (decrease) | 
|                           |                   |      |       |         |      |   |       |                     |  |  
|Revenues ($ in thousands): |                   |      |       |         |      |   |       |                     |  |   |      |        |   |  |     |     
|                           | Rooms             |      | $     | 238,946 |      |   | $     | 229,519             |  |   | $    | 9,427  |   |  |     | 4.1  | % 
|                           | Food and beverage |      |       | 72,429  |      |   |       | 70,791              |  |   |      | 1,638  |   |  |     | 2.3  | % 
|                           | Other             |      |       | 10,734  |      |   |       | 11,104              |  |   |      | (370   | ) |  |     | (3.3 | )%
|                           |                   |      |       |         |      |   |       |                     |  |   |      |       
|                           | Total revenues    |      | $     | 322,109 |      |   | $     | 311,414             |  |   | $    | 10,695 |   |  |     | 3.4  | % 
|                           |                   |      |       |         |      |   |       |                     |  |   |      |       
|Occupancy                  |                   |      | 61.0  | %       |      |   | 59.9  | %                   |  |   |      |        |   |  | 1.9 | %   
|ADR                        |                   | $    | 76.65 |         |      | $ | 74.44 |                     |  | $ | 2.21 |        |   |  | 3.0 | %   
|RevPAR                     |                   | $    | 46.76 |         |      | $ | 44.57 |                     |  | $ | 2.19 |        |   |  | 4.9 | %   





44



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

|                           |                                 |      |      |                  |      |  |      |                     |  |  |   |       |  |  |  |     |  
|-------------------------- | ------------------------------- | ---- | ---- | ---------------- | ---- |  | ---- | ------------------- |  |  | - | ----- |  |  |  | --- | -
|                           |                                 | 2004 |      |                  | 2003 |  |      | Increase (decrease)
|                           |                                 |      |      |                  |      |  |      |                     | 
|                           |                                 |      |      | ($ in thousands) |     
|Direct operating expenses: |                                 |      |      |                  |      |  |      |                     |  |  |   |       |  |  |  |    
|                           | Rooms                           |      | $    | 68,054           |      |  | $    | 65,814              |  |  | $ | 2,240 |  |  |  | 3.4 | %
|                           | Food and beverage               |      |      | 51,067           |      |  |      | 48,686              |  |  |   | 2,381 |  |  |  | 4.9 | %
|                           | Other                           |      |      | 8,029            |      |  |      | 7,970               |  |  |   | 59    |  |  |  | 0.7 | %
|                           |                                 |      |      |                  |      |  |      |                     |  |  |   |      
|                           | Total direct operating expenses |      | $    | 127,150          |      |  | $    | 122,470             |  |  | $ | 4,680 |  |  |  | 3.8 | %
|                           |                                 |      |      |                  |      |  |      |                     |  |  |   |      
|% of total revenues        |                                 |      | 39.5 | %                |      |  | 39.3 | %                   |  |  |   |       |  |  |  |    







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

|                          |                                                |                            |      |                  |        |      |   |         |                     |  |   |        |       |   |  |       |       |   
|------------------------- | ---------------------------------------------- | -------------------------- | ---- | ---------------- | ------ | ---- | - | ------- | ------------------- |  | - | ------ | ----- | - |  | ----- | ----- | --
|                          |                                                |                            | 2004 |                  |        | 2003 |   |         | Increase (decrease)
|                          |                                                |                            |      |                  |        |      |   |         |                     | 
|                          |                                                |                            |      | ($ in thousands) |       
|Other operating expenses: |                                                |                            |      |                  |        |      |   |         |                     |  |   |        |       |   |  |      
|                          | Other hotel operating costs:                   |                            |      |                  |        |      |   |         |                     |  |   |        |       |   |  |       |      
|                          |                                                | General and administrative |      | $                | 22,048 |      |   | $       | 19,721              |  |   | $      | 2,327 |   |  |       | 11.8  | % 
|                          |                                                | Advertising and promotion  |      |                  | 15,497 |      |   |         | 14,922              |  |   |        | 575   |   |  |       | 3.9   | % 
|                          |                                                | Franchise fees             |      |                  | 21,951 |      |   |         | 20,569              |  |   |        | 1,382 |   |  |       | 6.7   | % 
|                          |                                                | Repairs and maintenance    |      |                  | 18,417 |      |   |         | 17,719              |  |   |        | 698   |   |  |       | 3.9   | % 
|                          |                                                | Utilities                  |      |                  | 19,273 |      |   |         | 18,898              |  |   |        | 375   |   |  |       | 2.0   | % 
|                          |                                                | Other expenses             |      |                  | 75     |      |   |         | 153                 |  |   |        | (78   | ) |  |       | (51.0 | )%
|                          |                                                |                            |      |                  |        |      |   |         |                     |  |   |       
|                          | Total other hotel operating costs              |                            | $    | 97,261           |        |      | $ | 91,982  |                     |  | $ | 5,279  |       |   |  | 5.7   | %    
|                          |                                                |                            |      |                  |        |      |   |         |                     |  |   |       
|                          | Property and other taxes, insurance and leases |                            | $    | 21,884           |        |      | $ | 25,014  |                     |  | $ | (3,130 | )     |   |  | (12.5 | )%   
|                          | Corporate and other                            |                            |      | 17,263           |        |      |   | 20,892  |                     |  |   | (3,629 | )     |   |  | (17.4 | )%   
|                          | Casualty losses                                |                            |      | 2,313            |        |      |   |        |                     |  |   | 2,313  |       |   |  | n/m   |      
|                          | Depreciation and amortization                  |                            |      | 27,376           |        |      |   | 29,761  |                     |  |   | (2,385 | )     |   |  | (8.0  | )%   
|                          | Impairment of long-lived assets                |                            |      | 7,416            |        |      |   | 12,667  |                     |  |   | (5,251 | )     |   |  | (41.5 | )%   
|                          |                                                |                            |      |                  |        |      |   |         |                     |  |   |       
|                          | Total other operating expenses                 |                            | $    | 173,513          |        |      | $ | 180,316 |                     |  | $ | (6,803 | )     |   |  | (3.8  | )%   
|                          |                                                |                            |      |                  |        |      |   |         |                     |  |   |       
|                          | % of total revenues                            |                            |      | 53.9             | %      |      |   | 57.9    | %                   |  |   |        |       |   |  |       |      

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| |   |                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General and administrative costs increased $2.3 million,
    primarily due to increases in salary and employee benefits,
    costs related to labor union contract negotiations and higher
    bad debt expenses related to airline contracts;                              
|
| |  | Advertising and promotion expenses increased $0.6 million
    due to increased costs of advertising market research materials
    and salary and benefit increases;                                                                                                         
|
| |  | Franchise fees increased $1.4 million primarily as a result
    of increased revenues. As a percentage of room revenues,
    franchise fees were 9.2% of revenues in 2004 as compared to 9.0%
    in 2003, largely due to increased costs of brand loyalty
    programs; and
|
| |  | Repairs and maintenance costs increased $0.7 million
    primarily as a result of our continued focus on our preventative
    maintenance programs.                                                                                                                         











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| |    |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $1.1 million on the Holiday Inn Express Gadsden, AL as this
    hotel was identified for sale in January 2005 and the estimated
    selling price of the hotel was less than the assets
    carrying value. The estimated selling price of this hotel was
    negatively impacted by its franchise agreement expiring in
    August 2005 and the franchisor indicating that it will not renew
    the agreement;
|
| | b) | $3.7 million on the Holiday Inn Brunswick, GA as this hotel lost
    the business of a significant military group and the hotel is
    undergoing a required franchise conversion which is expected to
    result in reduced operating profits;                                                                                                                                                                  
|
| | c) | $0.6 million on the Quality Inn Hotel & Conference
    Center Metairie, LA as capital improvements were spent on health
    and safety items that added no incremental market value or
    revenue generating capacity at this hotel, resulting in the
    recording of impairment to bring the assets carrying value
    in line with the fair value;                                                          
|
| | d) | $0.9 million on the Holiday Inn St. Louis, MO as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets previously adjusted
    carrying value; and                                                                                                                                                                                                
|
| | e) | $0.6 million on the Holiday Inn Lawrence, KS as the financial
    performance of this hotel continues to decline as it is in need
    of a major renovation which is not economically justifiable as
    management has been notified the franchise agreement will not be
    renewed.                                                                                                                           

Non-operating
income (expenses)  Continuing Operations


|                                 |                                             |                                    |   |     |         |   |   |                     |         |   |   |        |         |   |  |        |      |  
|-------------------------------- | ------------------------------------------- | ---------------------------------- | - | --- | ------- | - | - | ------------------- | ------- | - | - | ------ | ------- | - |  | ------ | ---- | -
|                                 |                                             | 2004                               |   |     | 2003    |   |   | Increase (decrease) |        
|                                 |                                             |                                    |   |     |         |   |   |                     |        
|                                 |                                             | ($ in thousands)                   |  
|Non-operating income (expenses): |                                             |                                    |   |     |         |   |   |                     |         |   |   |        |         |   |  |       
|                                 | Interest income and other                   |                                    | $ | 681 |         |   | $ | 807                 |         |   | $ | (126   | )       |   |  | (15.6  | )%  
|                                 | Gain on asset dispositions                  |                                    |   |    |         |   |   | 445                 |         |   |   | (445   | )       |   |  | (100.0 | )%  
|                                 | Interest expense and other financing costs: |                                    |   |     |         |   |   |                     |         |   |   |        |         |   |  |        |     
|                                 |                                             | Preferred stock dividend           |   |     | (9,383  | ) |   |                     | (8,092  | ) |   |        | (1,291  | ) |  |        | 16.0 | %
|                                 |                                             | Interest expense                   |   |     | (42,990 | ) |   |                     | (28,581 | ) |   |        | (14,409 | ) |  |        | 50.4 | %
|                                 |                                             | Loss on preferred stock redemption |   |     | (6,063  | ) |   |                     |        |   |   |        | (6,063  | ) |  |        | n/m  |  
|                                 | Reorganization items                        |                                    |   |    |         |   |   | 1,397               |         |   |   | (1,397 | )       |   |  | (100.0 | )%  
|                                 | Minority interests                          |                                    |   | 691 |         |   |   | 1,294               |         |   |   | (603   | )       |   |  | (46.6  | )%  





47



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The Year Ended
December 31, 2003 Compared to the 2002 Combined
Period


Revenues  Continuing
Operations


|                           |                   |      |       |          |        |   |       |                     |  |   |       |         |   |  |      |       |   
|-------------------------- | ----------------- | ---- | ----- | -------- | ------ | - | ----- | ------------------- |  | - | ----- | ------- | - |  | ---- | ----- | --
|                           |                   |      |       | 2002     |        |   |       |                     | 
|                           |                   |      |       | Combined |        |   |      
|                           |                   | 2003 |       |          | Period |   |       | Increase (decrease) | 
|                           |                   |      |       |          |        |   |       |                     | 
|Revenues ($ in thousands): |                   |      |       |          |        |   |       |                     |  |   |       |         |   |  |      |      
|                           | Rooms             |      | $     | 229,519  |        |   | $     | 237,800             |  |   | $     | (8,281  | ) |  |      | (3.5  | )%
|                           | Food and beverage |      |       | 70,791   |        |   |       | 74,124              |  |   |       | (3,333  | ) |  |      | (4.5  | )%
|                           | Other             |      |       | 11,104   |        |   |       | 12,649              |  |   |       | (1,545  | ) |  |      | (12.2 | )%
|                           |                   |      |       |          |        |   |       |                     |  |   |       |        
|                           | Total revenues    |      | $     | 311,414  |        |   | $     | 324,573             |  |   | $     | (13,159 | ) |  |      | (4.1  | )%
|                           |                   |      |       |          |        |   |       |                     |  |   |       |        
|Occupancy                  |                   |      | 59.9  | %        |        |   | 61.5  | %                   |  |   |       |         |   |  | (2.6 | )%   
|ADR                        |                   | $    | 74.44 |          |        | $ | 75.02 |                     |  | $ | (0.58 | )       |   |  | (0.8 | )%   
|RevPAR                     |                   | $    | 44.57 |          |        | $ | 46.16 |                     |  | $ | (1.59 | )       |   |  | (3.4 | )%   





48



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

|                           |                                 |                  |      |          |        |  |       |                     |  |  |   |        |   |  |  |      |   
|-------------------------- | ------------------------------- | ---------------- | ---- | -------- | ------ |  | ----- | ------------------- |  |  | - | ------ | - |  |  | ---- | --
|                           |                                 |                  |      | 2002     |        |  |       |                     | 
|                           |                                 |                  |      | Combined |        |  |      
|                           |                                 | 2003             |      |          | Period |  |       | Increase (decrease) | 
|                           |                                 |                  |      |          |        |  |       |                     | 
|                           |                                 | ($ in thousands) |     
|Direct operating expenses: |                                 |                  |      |          |        |  |       |                     |  |  |   |        |   |  |  |     
|                           | Rooms                           |                  | $    | 65,814   |        |  | $     | 65,624              |  |  | $ | 190    |   |  |  | 0.3  | % 
|                           | Food and beverage               |                  |      | 48,686   |        |  |       | 52,269              |  |  |   | (3,583 | ) |  |  | (6.9 | )%
|                           | Other                           |                  |      | 7,970    |        |  |       | 8,716               |  |  |   | (746   | ) |  |  | (8.6 | )%
|                           |                                 |                  |      |          |        |  |       |                     |  |  |   |       
|                           | Total direct operating expenses |                  | $    | 122,470  |        |  | $     | 126,609             |  |  | $ | (4,139 | ) |  |  | (3.3 | )%
|                           |                                 |                  |      |          |        |  |       |                     |  |  |   |       
|% of total revenues        |                                 |                  | 39.3 | %        |        |  | 39.0% |                     |  |  |   |        |   |  |  |     











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

|                          |                                                |                            |   |          |        |  |   |                     |        |  |   |         |       |   |  |       |       |   
|------------------------- | ---------------------------------------------- | -------------------------- | - | -------- | ------ |  | - | ------------------- | ------ |  | - | ------- | ----- | - |  | ----- | ----- | --
|                          |                                                |                            |   | 2002     |        |  |   |                     |       
|                          |                                                |                            |   | Combined |        |  |  
|                          |                                                | 2003                       |   |          | Period |  |   | Increase (decrease) |       
|                          |                                                |                            |   |          |        |  |   |                     |       
|                          |                                                | ($ in thousands)           |  
|Other operating expenses: |                                                |                            |   |          |        |  |   |                     |        |  |   |         |       |   |  |      
|                          | Other hotel operating costs:                   |                            |   |          |        |  |   |                     |        |  |   |         |       |   |  |       |      
|                          |                                                | General and administrative |   | $        | 19,721 |  |   | $                   | 20,657 |  |   | $       | (936  | ) |  |       | (4.5  | )%
|                          |                                                | Advertising and promotion  |   |          | 14,922 |  |   |                     | 14,458 |  |   |         | 464   |   |  |       | 3.2   | % 
|                          |                                                | Franchise fees             |   |          | 20,569 |  |   |                     | 20,997 |  |   |         | (428  | ) |  |       | (2.0  | )%
|                          |                                                | Repairs and maintenance    |   |          | 17,719 |  |   |                     | 17,353 |  |   |         | 366   |   |  |       | 2.1   | % 
|                          |                                                | Utilities                  |   |          | 18,898 |  |   |                     | 17,292 |  |   |         | 1,606 |   |  |       | 9.3   | % 
|                          |                                                | Other expenses             |   |          | 153    |  |   |                     | 502    |  |   |         | (349  | ) |  |       | (69.5 | )%
|                          |                                                |                            |   |          |        |  |   |                     |        |  |   |        
|                          | Total other hotel operating costs              |                            | $ | 91,982   |        |  | $ | 91,259              |        |  | $ | 723     |       |   |  | 0.8   | %    
|                          |                                                |                            |   |          |        |  |   |                     |        |  |   |        
|                          | Property and other taxes, insurance and leases |                            | $ | 25,014   |        |  | $ | 23,459              |        |  | $ | 1,555   |       |   |  | 6.6   | %    
|                          | Corporate and other                            |                            |   | 20,892   |        |  |   | 17,476              |        |  |   | 3,416   |       |   |  | 19.5  | %    
|                          | Depreciation and amortization                  |                            |   | 29,761   |        |  |   | 43,636              |        |  |   | (13,875 | )     |   |  | (31.8 | )%   
|                          | Impairment of long-lived assets                |                            |   | 12,667   |        |  |   |                    |        |  |   | 12,667  |       |   |  | n/m   |      
|                          |                                                |                            |   |          |        |  |   |                     |        |  |   |        
|                          | Total other operating expenses                 |                            | $ | 180,316  |        |  | $ | 175,830             |        |  | $ | 4,486   |       |   |  | 2.6   | %    
|                          |                                                |                            |   |          |        |  |   |                     |        |  |   |        
|                          | % of total revenues                            |                            |   | 57.9     | %      |  |   | 54.2                | %      |  |   |         |       |   |  |       |      





| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General and administrative expenses decreased $0.9 million
    due primarily to the release of excess bad debt reserves based
    on favorable collection history; and

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| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Utility costs increased $1.6 million due to increases in
    rates and increases in consumption caused by severe weather
    conditions in the Northeast.





| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Insurance costs increased $1.7 million due to increased
    insurance premium costs and safety training programs;                                       
|
| |  | Ground and property rent increased $0.5 million due to
    escalation clauses in the lease agreements; and                                              
|
| |  | Equipment rentals decreased by $0.5 million as a result of
    the initiation of improved lease programs for hotel vans, copier
    and other equipment.





| |   |                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We incurred $4.6 million in legal, professional and other
    costs related to the Chapter 11 proceedings. Prior to our
    emergence from Chapter 11, these costs were classified as
    reorganization expenses; and                                                              
|
| |  | Legal and other professional fees decreased by approximately
    $1.2 million partially as a result of our reduced reliance
    on external professional services and also as a result of the
    resolution of a number of litigation cases through the
    Chapter 11 proceedings.







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) $4.5 million on the Crown Plaza Macon, GA as the
    expected holding period for this hotel was reduced to six months
    because the Company was unable to locate a lender to refinance
    the maturing mortgage on this hotel as a single asset loan;                                                                                                                                                                                                               
|
| | b) $2.5 million on the Holiday Inn St. Louis
    North, MO because the nearby airport renovations drastically
    changed the ingress and egress of this hotel thereby
    significantly lowering the financial performance of this hotel;                                                                                                                                                                                                                                
|
| | c) $1.8 million on the Quality Hotel & Conference
    Center Metairie, LA because of a significant decline in this
    hotels group room business because this hotel is in need
    of a major renovation, which the company had previously planned
    but subsequently discarded due to an inadequate expected return
    on investment. Transient business has also declined, resulting
    in reduced operating profits which led to the recording of
    impairment;

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



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

|                                 |                                             |                          |   |          |         |   |   |                     |         |   |   |        |        |   |  |       |     |  
|-------------------------------- | ------------------------------------------- | ------------------------ | - | -------- | ------- | - | - | ------------------- | ------- | - | - | ------ | ------ | - |  | ----- | --- | -
|                                 |                                             |                          |   | 2002     |         |   |   |                     |        
|                                 |                                             |                          |   | Combined |         |   |  
|                                 |                                             | 2003                     |   |          | Period  |   |   | Increase (decrease) |        
|                                 |                                             |                          |   |          |         |   |   |                     |        
|                                 |                                             | ($ in thousands)         |  
|Non-operating income (expenses): |                                             |                          |   |          |         |   |   |                     |         |   |   |        |        |   |  |      
|                                 | Interest income and other                   |                          | $ | 807      |         |   | $ | 4,954               |         |   | $ | (4,147 | )      |   |  | (83.7 | )% 
|                                 | Gain on asset dispositions                  |                          |   | 445      |         |   |   |                    |         |   |   | 445    |        |   |  | n/m   |    
|                                 | Interest expense and other financing costs: |                          |   |          |         |   |   |                     |         |   |   |        |        |   |  |       |    
|                                 |                                             | Preferred stock dividend |   |          | (8,092  | ) |   |                     |        |   |   |        | (8,092 | ) |  |       | n/m |  
|                                 |                                             | Interest expense         |   |          | (28,581 | ) |   |                     | (28,273 | ) |   |        | (308   | ) |  |       | 1.1 | %
|                                 | Reorganization items                        |                          |   | 1,397    |         |   |   | 11,038              |         |   |   | (9,641 | )      |   |  | (87.3 | )% 
|                                 | Minority interests                          |                          |   | 1,294    |         |   |   | 273                 |         |   |   | 1,021  |        |   |  | 374.0 | %  











| |   |                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Adjustments recorded on the application of fresh start reporting
    of $33.3 million consisting of gain on extinguishment of
    debt of $223.2 million, offset by fixed asset write-downs
    and other fresh start adjustments of
    $189.9 million; and

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| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Expenses incurred as a result of the Chapter 11 filing of
    approximately $22.3 million, consisting mainly of legal and
    professional fees.



Results of Operations  Discontinued Operations










| |    |                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | an additional $0.1 million on the Holiday Inn Express
    Pensacola, FL to reflect the loss recorded on sale of this hotel
    in March 2004;                                                                                                                                                                 
|
| | b) | an additional $0.5 million on the Downtown Plaza Hotel
    Cincinnati, OH to reflect the lowered estimated selling price of
    the hotel and the loss recorded on sale of the hotel in April
    2004;                                                                                                       
|
| | c) | an additional $0.4 million on the Holiday Inn Morgantown,
    WV as capital improvements were spent on this hotel for
    franchise compliance that did not add incremental value or
    revenue generating capacity to the property;                                                                         
|
| | d) | an additional $0.7 million on the Holiday Inn Memphis, TN
    to reflect the reduced selling price and additional charges to
    dispose of this hotel in December 2004;                                                                                                                                      
|
| | e) | an additional $1.0 million on the Holiday Inn Austin
    (South), TX to reflect a reduction in the estimated selling
    price due to feedback from potential buyers that this hotel had
    limited future franchise options due to its exterior corridors.
    This hotel remains for sale at March 1, 2005;



| |    |                                                                                                                                                                                                                                                                    
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | f) | $1.7 million on the Holiday Inn Rolling Meadows, IL to
    record the difference between the estimated selling price and
    the carrying value of this hotel consistent with an offer
    received on the hotel. This hotel remains for sale at
    March 1, 2005;



| |    |                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------
| | g) | $0.4 million on the Holiday Inn Florence, KY primarily
    related to disposal costs incurred on sale of the hotel in
    December 2004; and
|
| | h) | additional adjustments on four other assets aggregating to a
    reduction of impairment charges of $0.1 million.                           



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| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $1.1 million on the Holiday Inn Express Pensacola, FL as
    this hotel was identified for sale in the second quarter 2003.
    The performance of this hotel was negatively impacted in 2003 by
    the opening of three new hotels in its market and the conversion
    of another fully renovated hotel to the Holiday Inn Express
    brand in April 2003;                                                                            
|
| | b) | $1.0 million on the Downtown Plaza Hotel Cincinnati, OH as
    this hotel was listed for sale in the second quarter 2003.
    Operating profits decreased more than forecast at this hotel
    following the loss of its franchise affiliation in May 2003;                                                                                                                                                                               
|
| | c) | $0.8 million on the Holiday Inn Morgantown, WV as this
    hotel was identified for sale in the second quarter 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the fourth quarter of 2003 the
    expected selling price of this hotel was lowered as a result of
    the opening of a Radisson hotel in the market, which negatively
    impacted the operating results of this hotel;
|
| | d) | $0.6 million on the Holiday Inn Fort Mitchell, KY as
    this hotel was identified for sale in the second quarter 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the third quarter of 2003 it was
    determined with the broker that the selling price needed to be
    lowered to find a willing buyer, resulting in an impairment
    charge;                                      
|
| | e) | $0.6 million on the land parcel in Mt. Laurel, NJ as this
    property was identified for sale in the second quarter of 2003.
    During the sales process the broker recommended a price
    reduction which resulted in $0.6 million of impairment
    charges;                                                                                                                                                                         



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | f) | $0.6 million on the Holiday Inn Market Center Dallas, TX as
    this hotel was identified for sale in the second quarter 2003 at
    which time $0.6 million of impairment was recorded. The
    reduction in value was primarily related to the
    franchisors decision to not transfer the franchise
    agreement on this hotel to a new buyer. This hotel was sold in
    January 2004 for net proceeds of $2.5 million compared to
    its adjusted net book value of $2.4 million;



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | g) | $0.3 million on the Holiday Inn Memphis, TN as this hotel
    was identified for sale in the second quarter of 2003 at which
    time, based on the anticipated selling price, no impairment was
    required. In the third quarter of 2003 it was determined by the
    broker that it was advisable that the selling price should be
    lowered because the franchise agreement was not going to be
    renewed;
|
| | h) | $0.1 million on the Holiday Inn Austin (South), TX as this
    hotel was identified for sale in the second quarter of 2003 at
    which time impairment was recorded based on a listing
    brokers evaluation of the hotel; and;                                                                                                                                                                                 



| |    |                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i) | $0.1 million on the land parcel in Fayetteville, NC as this
    property was identified for sale in the second quarter of 2003
    at which time, based on the anticipated selling price, no
    impairment was required. In the third quarter 2003 the listing
    broker determined it was advisable to lower the asking price
    which resulted in an impairment charge.



Income taxes




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EBITDA






|                                                                 |  |                  |         |   |      |          |         |        |  |   |         |  
|---------------------------------------------------------------- |  | ---------------- | ------- | - | ---- | -------- | ------- | ------ |  | - | ------- | -
|                                                                 |  |                  |         |   |      | 2002     |        
|                                                                 |  |                  |         |   |      | Combined |        
|                                                                 |  | 2004             |         |   | 2003 |          |         | Period | 
|                                                                 |  |                  |         |   |      |          |         |        | 
|                                                                 |  | ($ in thousands) |        
|Continuing operations:                                           |  |                  |         |   |      |          |         |        |  |   |         |  
|(Loss) income from continuing operations                         |  | $                | (35,846 | ) |      | $        | (27,074 | )      |  | $ | 10,254  |  
|Depreciation and amortization                                    |  |                  | 27,376  |   |      |          | 29,761  |        |  |   | 43,636  |  
|Fresh start adjustments                                          |  |                  |        |   |      |          |        |        |  |   | (33,318 | )
|Interest income                                                  |  |                  | (647    | ) |      |          | (486    | )      |  |   | (639    | )
|Interest expense                                                 |  |                  | 42,990  |   |      |          | 28,581  |        |  |   | 28,273  |  
|Preferred stock dividends                                        |  |                  | 9,383   |   |      |          | 8,092   |        |  |   |        |  
|Loss on preferred stock redemption                               |  |                  | 6,063   |   |      |          |        |        |  |   |        |  
|Provision (benefit) for income taxes  continuing
    operations |  |                  | 228     |   |      |          | 178     |        |  |   | (128    | )
|                                                                 |  |                  |         |   |      |          |         |        | 
|EBITDA from continuing operations                                |  | $                | 49,547  |   |      | $        | 39,052  |        |  | $ | 48,078  |  
|                                                                 |  |                  |         |   |      |          |         |        | 

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|                                                                                                                                           |  |                  |       |   |      |          |        |        |  |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------- | ----- | - | ---- | -------- | ------ | ------ |  | - | ------ | 
|                                                                                                                                           |  |                  |       |   |      | 2002     |       
|                                                                                                                                           |  |                  |       |   |      | Combined |       
|                                                                                                                                           |  | 2004             |       |   | 2003 |          |        | Period | 
|                                                                                                                                           |  |                  |       |   |      |          |        |        | 
|                                                                                                                                           |  | ($ in thousands) |      
|Post-emergence Chapter 11 expenses, included in corporate
    and other on our consolidated statement of operations                        |  | $                | 457   |   |      | $        | 4,752  |        |  | $ | 800    | 
|Reorganization expenses                                                                                                                    |  |                  |      |   |      |          | 1,397  |        |  |   | 22,278 | 
|Impairment loss                                                                                                                            |  |                  | 7,416 |   |      |          | 12,667 |        |  |   |       | 
|Gain on asset dispositions                                                                                                                 |  |                  |      |   |      |          | (445   | )      |  |   |       | 
|Casualty losses for damage caused to our properties by the
    hurricanes that hit the southeastern United States in the third
    quarter |  |                  | 2,313 |   |      |          |       |        |  |   |       | 
|Adjustments to bankruptcy claims reserves                                                                                                  |  |                  | (38   | ) |      |          | (218   | )      |  |   |       | 

Quarterly Results of Operations




LODGIAN, INC. AND SUBSIDIARIES


QUARTERLY OPERATING DATA


|                    |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |        |        |  |        |        |        |  |        |        |        | 
|------------------- | ----------------- | ----------------- | ------ | ------ | ------- |  | ------ | ------- | ------ |  | ------- | ------ | ------ | ------- | ------ | ------ | ------- |  | ------ | ------- | ------ |  | ------- | ------ | ------ |  | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                    |                   | 2004              |        |        | 2003    | 
|                    |                   |                   |        |        |         | 
|                    |                   | Fourth            |        |        | Third   |  |        | Second  |        |  | First   |        |        | Fourth  |        |        | Third   |  |        | Second  |        |  | First   |       
|                    |                   | Quarter           |        |        | Quarter |  |        | Quarter |        |  | Quarter |        |        | Quarter |        |        | Quarter |  |        | Quarter |        |  | Quarter |       
|                    |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |       
|                    |                   | ($ in thousands)  |       
|Revenues:           |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |        |        |  |        |        |        |  |        |       
|                    | Rooms             |                   | $      | 52,253 |         |  | $      | 64,805  |        |  | $       | 64,325 |        |         | $      | 57,563 |         |  | $      | 52,089  |        |  | $       | 62,506 |        |  | $      | 61,010 |        |  | $      | 53,914 |       
|                    | Food and beverage |                   |        | 19,555 |         |  |        | 16,950  |        |  |         | 19,436 |        |         |        | 16,488 |         |  |        | 18,800  |        |  |         | 16,407 |        |  |        | 18,977 |        |  |        | 16,607 |       
|                    | Other             |                   |        | 2,358  |         |  |        | 2,806   |        |  |         | 2,816  |        |         |        | 2,754  |         |  |        | 2,567   |        |  |         | 2,841  |        |  |        | 2,838  |        |  |        | 2,858  |       
|                    |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |       
|                    |                   |                   | 74,166 |        |         |  | 84,561 |         |        |  | 86,577  |        |        |         | 76,805 |        |         |  | 73,456 |         |        |  | 81,754  |        |        |  | 82,825 |        |        |  | 73,379 |       
|                    |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |       
|Operating expenses: |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |        |        |  |        |        |        |  |        |       
|                    | Direct:           |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |        |        |  |        |        |        |  |        |        |       
|                    |                   | Rooms             |        |        | 16,355  |  |        |         | 18,722 |  |         |        | 16,960 |         |        |        | 16,018  |  |        |         | 16,023 |  |         |        | 17,697 |  |        |        | 16,730 |  |        |        | 15,363 | 
|                    |                   | Food and beverage |        |        | 14,225  |  |        |         | 12,595 |  |         |        | 12,713 |         |        |        | 11,534  |  |        |         | 12,557 |  |         |        | 12,030 |  |        |        | 12,365 |  |        |        | 11,734 | 
|                    |                   | Other             |        |        | 1,885   |  |        |         | 2,095  |  |         |        | 2,077  |         |        |        | 1,972   |  |        |         | 2,178  |  |         |        | 2,013  |  |        |        | 1,842  |  |        |        | 1,938  | 
|                    |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |       
|                    |                   |                   | 32,465 |        |         |  | 33,412 |         |        |  | 31,750  |        |        |         | 29,524 |        |         |  | 30,758 |         |        |  | 31,740  |        |        |  | 30,937 |        |        |  | 29,036 |       
|                    |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |       
|                    |                   |                   | 41,701 |        |         |  | 51,149 |         |        |  | 54,827  |        |        |         | 47,281 |        |         |  | 42,698 |         |        |  | 50,014  |        |        |  | 51,888 |        |        |  | 44,343 |       
|                    |                   |                   |        |        |         |  |        |         |        |  |         |        |        |         |        |        |         |  |        |         |        |  |         |       

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|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |        |        |  
|---------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------- | ------- | ------ | ------- | - | ------ | ------- | ------ | - | ------- | ------ | ------- | ------- | ------ | ------ | ------- | - | ------- | ------- | ------ | - | ------- | ------ | ------ | - | ------ | ------ | ------ | - | ------- | ------ | ------ | -
|                                                                                   |                                                                | 2004                               |         |        | 2003    |  
|                                                                                   |                                                                |                                    |         |        |         |  
|                                                                                   |                                                                | Fourth                             |         |        | Third   |   |        | Second  |        |   | First   |        |         | Fourth  |        |        | Third   |   |         | Second  |        |   | First   |       
|                                                                                   |                                                                | Quarter                            |         |        | Quarter |   |        | Quarter |        |   | Quarter |        |         | Quarter |        |        | Quarter |   |         | Quarter |        |   | Quarter |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   |                                                                | ($ in thousands)                   |        
|Other operating expenses:                                                          |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |       
|                                                                                   | Other hotel operating costs                                    |                                    |         | 23,790 |         |   |        | 25,577  |        |   |         | 23,822 |         |         |        | 24,072 |         |   |         | 22,546  |        |   |         | 24,164 |        |   |        | 22,797 |        |   |         | 22,475 |       
|                                                                                   | Property and other taxes, insurance and leases                 |                                    |         | 5,160  |         |   |        | 5,597   |        |   |         | 5,376  |         |         |        | 5,751  |         |   |         | 5,343   |        |   |         | 6,087  |        |   |        | 6,923  |        |   |         | 6,661  |       
|                                                                                   | Corporate and other                                            |                                    |         | 3,548  |         |   |        | 4,519   |        |   |         | 4,782  |         |         |        | 4,413  |         |   |         | 4,612   |        |   |         | 4,235  |        |   |        | 6,075  |        |   |         | 5,970  |       
|                                                                                   | Casualty gains and losses                                      |                                    |         | 295    |         |   |        | 2,019   |        |   |         |       |         |         |        |       |         |   |         |        |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   | Depreciation and amortization                                  |                                    |         | 6,635  |         |   |        | 7,066   |        |   |         | 6,870  |         |         |        | 6,805  |         |   |         | 7,194   |        |   |         | 7,572  |        |   |        | 7,573  |        |   |         | 7,422  |       
|                                                                                   | Impairment of long-lived assets                                |                                    |         | 6,809  |         |   |        | 607     |        |   |         |       |         |         |        |       |         |   |         | 11,286  |        |   |         | 2      |        |   |        | 1,378  |        |   |         |       |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   | Other operating expenses                                       |                                    |         | 46,237 |         |   |        | 45,385  |        |   |         | 40,850 |         |         |        | 41,041 |         |   |         | 50,981  |        |   |         | 42,060 |        |   |        | 44,746 |        |   |         | 42,528 |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   |                                                                |                                    | (4,534  | )      |         |   | 5,764  |         |        |   | 13,977  |        |         |         | 6,240  |        |         |   | (8,283  | )       |        |   | 7,954   |        |        |   | 7,142  |        |        |   | 1,815   |       
|Other income (expenses):                                                           |                                                                |                                    |         |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   |        |         |        |   |        |        |        |   |       |        |        |   |        |       
|                                                                                   | Interest income and other                                      |                                    |         | 360    |         |   |        | 212     |        |   |         | 66     |         |         |        | 43     |         |   |         | 486     |        |   |         | 114    |        |   |        | 124    |        |   |         | 83     |       
|                                                                                   | Gain on asset dispositions                                     |                                    |         |       |         |   |        |        |        |   |         |       |         |         |        |       |         |   |         | 445     |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   | Interest expense and other financing costs:                    |                                    |         |       |         |   |        |        |        |   |         |       |         |         |        |       |         |   |         |        |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   |                                                                | Preferred stock dividend           |         |        |        |   |        |         | (865   | ) |         |        | (4,233  | )       |        |        | (4,285  | ) |         |         | (4,065 | ) |         |        | (4,027 | ) |        |        |       |   |         |        |        |  
|                                                                                   |                                                                | Other interest expense             |         |        | (7,561  | ) |        |         | (7,350 | ) |         |        | (19,920 | )       |        |        | (8,159  | ) |         |         | (7,718 | ) |         |        | (7,665 | ) |        |        | (6,919 | ) |         |        | (6,279 | )
|                                                                                   |                                                                | Loss on preferred stock redemption |         |        |        |   |        |         | (4,471 | ) |         |        | (1,592  | )       |        |        |        |   |         |         |       |   |         |        |       |   |        |        |       |   |         |        |       |  
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|(Loss) income before income taxes, reorganization items and
    minority interests |                                                                |                                    | (11,735 | )      |         |   | (6,710 | )       |        |   | (11,702 | )      |         |         | (6,161 | )      |         |   | (19,135 | )       |        |   | (3,624  | )      |        |   | 347    |        |        |   | (4,381  | )     
|Reorganization items                                                               |                                                                |                                    |        |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   | 647     |         |        |   |        |        |        |   | (808   | )      |        |   | (1,237  | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Loss before income taxes and minority interest                                     |                                                                |                                    | (11,735 | )      |         |   | (6,710 | )       |        |   | (11,702 | )      |         |         | (6,161 | )      |         |   | (18,488 | )       |        |   | (3,624  | )      |        |   | (461   | )      |        |   | (5,618  | )     
|(Provision) benefit for income taxes  continuing
    operations                   |                                                                |                                    | 259     |        |         |   | (337   | )       |        |   | (75     | )      |         |         | (76    | )      |         |   | 48      |         |        |   | (75     | )      |        |   | (75    | )      |        |   | (76     | )     
|Minority interests (net of taxes, nil)                                             |                                                                |                                    | 406     |        |         |   | 503    |         |        |   | (71     | )      |         |         | (147   | )      |         |   | 1,412   |         |        |   | 99      |        |        |   | (69    | )      |        |   | (149    | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Loss from continuing operations                                                    |                                                                |                                    | (11,070 | )      |         |   | (6,544 | )       |        |   | (11,848 | )      |         |         | (6,384 | )      |         |   | (17,028 | )       |        |   | (3,600  | )      |        |   | (605   | )      |        |   | (5,842  | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Discontinued operations:                                                           |                                                                |                                    |         |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |       
|                                                                                   | (Loss) income from discontinued operations before income taxes |                                    |         | (2,694 | )       |   |        | 2,807   |        |   |         | 4,601  |         |         |        | (702   | )       |   |         | 522     |        |   |         | (46    | )      |   |        | (1,836 | )      |   |         | (3,243 | )     
|                                                                                   | Income tax benefit (provision)                                 |                                    |         |       |         |   |        |        |        |   |         |       |         |         |        |       |         |   |         |        |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   | (Loss) income from discontinued operations                     |                                    |         | (2,694 | )       |   |        | 2,807   |        |   |         | 4,601  |         |         |        | (702   | )       |   |         | 522     |        |   |         | (46    | )      |   |        | (1,836 | )      |   |         | (3,243 | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Net loss                                                                           |                                                                |                                    | (13,764 | )      |         |   | (3,737 | )       |        |   | (7,247  | )      |         |         | (7,086 | )      |         |   | (16,506 | )       |        |   | (3,646  | )      |        |   | (2,441 | )      |        |   | (9,085  | )     
|Preferred stock dividend                                                           |                                                                |                                    |        |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   |        |         |        |   |        |        |        |   | (3,818 | )      |        |   | (3,776  | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Net loss attributable to common stock                                              |                                                                | $                                  | (13,764 | )      |         | $ | (3,737 | )       |        | $ | (7,247  | )      |         | $       | (7,086 | )      |         | $ | (16,506 | )       |        | $ | (3,646  | )      |        | $ | (6,259 | )      |        | $ | (12,861 | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       

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|                                                                 |  |                  |         |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |        |  
|---------------------------------------------------------------- |  | ---------------- | ------- | - | ------- | - | ------ | ------- |  | - | ------- | - |  | ------- | ------ | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------ | - |  | - | ------ | -
|                                                                 |  | 2004             |         |   | 2003    |  
|                                                                 |  |                  |         |   |         |  
|                                                                 |  | Fourth           |         |   | Third   |   |        | Second  |  |   | First   |   |  | Fourth  |        |   | Third   |   |         | Second  |  |   | First   |  
|                                                                 |  | Quarter          |         |   | Quarter |   |        | Quarter |  |   | Quarter |   |  | Quarter |        |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                                                 |  |                  |         |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |         |         |  |   |         |  
|                                                                 |  | ($ in thousands) |        
|Continuing operations:                                           |  |                  |         |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |        |  
|(Loss) income from continuing operations                         |  | $                | (11,071 | ) |         | $ | (6,544 | )       |  | $ | (11,847 | ) |  | $       | (6,384 | ) |         | $ | (17,028 | )       |  | $ | (3,600  | ) |  | $ | (605   | ) |  | $ | (5,841 | )
|Depreciation and amortization                                    |  |                  | 6,635   |   |         |   | 7,066  |         |  |   | 6,870   |   |  |         | 6,805  |   |         |   | 7,194   |         |  |   | 7,572   |   |  |   | 7,573  |   |  |   | 7,422  |  
|Fresh start adjustments                                          |  |                  |        |   |         |   |       |         |  |   |        |   |  |         |       |   |         |   |        |         |  |   |        |   |  |   |       |   |  |   |       |  
|Interest income                                                  |  |                  | (345    | ) |         |   | (175   | )       |  |   | (80     | ) |  |         | (47    | ) |         |   | (196    | )       |  |   | (72     | ) |  |   | (104   | ) |  |   | (114   | )
|Interest expense                                                 |  |                  | 7,561   |   |         |   | 7,350  |         |  |   | 19,920  |   |  |         | 8,159  |   |         |   | 7,718   |         |  |   | 7,665   |   |  |   | 6,919  |   |  |   | 6,279  |  
|Preferred stock dividends                                        |  |                  |        |   |         |   | 865    |         |  |   | 4,233   |   |  |         | 4,285  |   |         |   | 4,065   |         |  |   | 4,027   |   |  |   |        |   |  |   |       |  
|Loss on preferred stock redemption                               |  |                  |        |   |         |   | 4,471  |         |  |   | 1,592   |   |  |         |       |   |         |   |        |         |  |   |        |   |  |   |       |   |  |   |       |  
|Provision (benefit for income taxes  continuing
    operations) |  |                  | (260    | ) |         |   | 337    |         |  |   | 75      |   |  |         | 76     |   |         |   | (48     | )       |  |   | 75      |   |  |   | 75     |   |  |   | 76     |  
|                                                                 |  |                  |         |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |         |         |  |   |         |  
|EBITDA from continuing operations                                |  | $                | 2,520   |   |         | $ | 13,370 |         |  | $ | 20,763  |   |  | $       | 12,894 |   |         | $ | 1,705   |         |  | $ | 15,667  |   |  | $ | 13,858 |   |  | $ | 7,822  |  
|                                                                 |  |                  |         |   |         |   |        |         |  |   |         |   |  |         |        |   |         |   |         |         |  |   |         |  



|                                                                                                                                           |  |                  |       |   |         |   |       |         |  |   |         |  |  |         |     |  |         |   |        |         |  |   |         |  |  |   |       |  |  |   |       | 
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------- | ----- | - | ------- | - | ----- | ------- |  | - | ------- |  |  | ------- | --- |  | ------- | - | ------ | ------- |  | - | ------- |  |  | - | ----- |  |  | - | ----- | 
|                                                                                                                                           |  | 2004             |       |   | 2003    |  
|                                                                                                                                           |  |                  |       |   |         |  
|                                                                                                                                           |  | Fourth           |       |   | Third   |   |       | Second  |  |   | First   |  |  | Fourth  |     |  | Third   |   |        | Second  |  |   | First   | 
|                                                                                                                                           |  | Quarter          |       |   | Quarter |   |       | Quarter |  |   | Quarter |  |  | Quarter |     |  | Quarter |   |        | Quarter |  |   | Quarter | 
|                                                                                                                                           |  |                  |       |   |         |   |       |         |  |   |         |  |  |         |     |  |         |   |        |         |  |   |         | 
|                                                                                                                                           |  | ($ in thousands) |      
|Post-emergence Chapter 11 expenses, included in corporate
    and other on consolidated statement of operations                            |  | $                | 60    |   |         | $ | 67    |         |  | $ | 135     |  |  | $       | 195 |  |         | $ | 1,289  |         |  | $ | 320     |  |  | $ | 965   |  |  | $ | 2,178 | 
|Reorganization expenses                                                                                                                    |  |                  |      |   |         |   |      |         |  |   |        |  |  |         |    |  |         |   | (647   | )       |  |   | 0       |  |  |   | 808   |  |  |   | 1,237 | 
|Impairment loss                                                                                                                            |  |                  | 6,809 |   |         |   | 607   |         |  |   |        |  |  |         |    |  |         |   | 11,287 |         |  |   | 2       |  |  |   | 1,378 |  |  |   |      | 
|Gain on asset dispositions                                                                                                                 |  |                  |      |   |         |   |      |         |  |   |        |  |  |         |    |  |         |   | (445   | )       |  |   |        |  |  |   |      |  |  |   |      | 
|Casualty losses for damage caused to our properties by the
    hurricanes that hit the Southeastern United States in the third
    quarter |  |                  | 294   |   |         |   | 2,019 |         |  |   |        |  |  |         |    |  |         |   |       |         |  |   |        |  |  |   |      |  |  |   |      | 
|Adjustments to bankruptcy claims reserves                                                                                                  |  |                  | (38   | ) |         |   |      |         |  |   |        |  |  |         |    |  |         |   | (218   | )       |  |   |        |  |  |   |      |  |  |   |      | 



Liquidity and Capital Resources




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



57



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Cash Flow






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





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



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











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



|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            |  |   |         |       |  |   |       |        | 
|----------------------------------------------- | ----------------------- | ---------------- | ------- | ----------------------------------- | ---- | - | ------ | ------ |  | - | ------ | ----- |  | ---- | ------ | ------ | ---- | - | ----- | ---------- |  | - | ------- | ----- |  | - | ----- | ------ | 
|                                                |                         |                  |         | Contractual Obligations Due by Year |     
|                                                |                         |                  |         |                                     |     
|                                                |                         | Total            |         |                                     | 2005 |   |        | 2006   |  |   | 2007   |       |  | 2008 |        |        | 2009 |   |       | After 2009 | 
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            | 
|                                                |                         | ($ in thousands) |        
|Continuing Operations                           |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            |  |   |         |       |  |   |       |       
|Refinancing debt(1)                             |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            |  |   |         |       |  |   |       |       
|Merrill Lynch Mortgage Lending, Inc.  Floating |                         | $                | 75,150  |                                     |      | $ | 923    |        |  | $ | 74,227 |       |  | $    |       |        |      | $ |      |            |  | $ |        |       |  | $ |      |       
|Merrill Lynch Mortgage Lending, Inc.  Fixed    |                         |                  | 258,410 |                                     |      |   | 4,110  |        |  |   | 4,392  |       |  |      | 4,695  |        |      |   | 4,970 |            |  |   | 240,243 |       |  |   |      |       
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            | 
|Merrill Lynch Mortgage Lending, Inc.  Total    |                         |                  | 333,560 |                                     |      |   | 5,033  |        |  |   | 78,619 |       |  |      | 4,695  |        |      |   | 4,970 |            |  |   | 240,243 |       |  |   |      |       
|Other financings                                |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            |  |   |         |       |  |   |       |       
|Computer Share Trust Company of Canada          |                         |                  | 7,843   |                                     |      |   | 258    |        |  |   | 279    |       |  |      | 7,306  |        |      |   |      |            |  |   |        |       |  |   |      |       
|Column Financial, Inc.                          |                         |                  | 25,058  |                                     |      |   | 2,491  |        |  |   | 2,768  |       |  |      | 3,076  |        |      |   | 3,418 |            |  |   | 4,133   |       |  |   | 9,172 |       
|Lehman Brothers Holdings, Inc.                  |                         |                  | 22,927  |                                     |      |   | 529    |        |  |   | 580    |       |  |      | 21,818 |        |      |   |      |            |  |   |        |       |  |   |      |       
|JP Morgan Chase Bank, Trustee                   |                         |                  | 10,110  |                                     |      |   | 10,110 |        |  |   |       |       |  |      |       |        |      |   |      |            |  |   |        |       |  |   |      |       
|DDL Kinser                                      |                         |                  | 2,286   |                                     |      |   | 2,286  |        |  |   |       |       |  |      |       |        |      |   |      |            |  |   |        |       |  |   |      |       
|Column Financial, Inc.                          |                         |                  | 8,545   |                                     |      |   | 437    |        |  |   | 480    |       |  |      | 528    |        |      |   | 580   |            |  |   | 693     |       |  |   | 5,827 |       
|Column Financial, Inc.                          |                         |                  | 3,069   |                                     |      |   | 3,069  |        |  |   |       |       |  |      |       |        |      |   |      |            |  |   |        |       |  |   |      |       
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            | 
|                                                | Total  other financing |                  |         | 79,838                              |      |   |        | 19,180 |  |   |        | 4,107 |  |      |        | 32,728 |      |   |       | 3,998      |  |   |         | 4,826 |  |   |       | 14,999 | 
|                                                |                         |                  |         |                                     |      |   |        |        |  |   |        |       |  |      |        |        |      |   |       |            | 

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|                                                   |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            |  |  |         |     |  |  |         |       | 
|-------------------------------------------------- | ---------------------------------------------------- | ---------------- | ------- | ----------------------------------- | ---- |  | ------ | ----- |  |  | ------- | ------ |  | ---- | ------ | --- | ---- |  | ------ | ---------- |  |  | ------- | --- |  |  | ------- | ----- | 
|                                                   |                                                      |                  |         | Contractual Obligations Due by Year |     
|                                                   |                                                      |                  |         |                                     |     
|                                                   |                                                      | Total            |         |                                     | 2005 |  |        | 2006  |  |  | 2007    |        |  | 2008 |        |     | 2009 |  |        | After 2009 | 
|                                                   |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            | 
|                                                   |                                                      | ($ in thousands) |        
|Total Mortgage Debt                                |                                                      |                  | 413,398 |                                     |      |  | 24,213 |       |  |  | 82,726  |        |  |      | 37,423 |     |      |  | 8,968  |            |  |  | 245,069 |     |  |  | 14,999  |      
|Long-term debt  other(2)                          |                                                      |                  | 5,035   |                                     |      |  | 1,077  |       |  |  | 968     |        |  |      | 1,364  |     |      |  | 858    |            |  |  | 151     |     |  |  | 617     |      
|                                                   |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            | 
|Total long-term debt                               |                                                      |                  | 418,433 |                                     |      |  | 25,290 |       |  |  | 83,694  |        |  |      | 38,787 |     |      |  | 9,826  |            |  |  | 245,220 |     |  |  | 15,616  |      
|Interest Expense(3)                                |                                                      |                  | 107,254 |                                     |      |  | 28,184 |       |  |  | 25,442  |        |  |      | 20,888 |     |      |  | 18,883 |            |  |  | 11,545  |     |  |  | 2,312   |      
|Ground and parking lease obligations               |                                                      |                  | 116,615 |                                     |      |  | 2,887  |       |  |  | 2,890   |        |  |      | 2,935  |     |      |  | 3,008  |            |  |  | 3,043   |     |  |  | 101,852 |      
|Purchase obligations(4)                            |                                                      |                  | 2,184   |                                     |      |  | 84     |       |  |  | 84      |        |  |      | 84     |     |      |  | 84     |            |  |  | 84      |     |  |  | 1,764   |      
|                                                   |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            | 
|Total obligations related to continuing operations |                                                      |                  | 644,486 |                                     |      |  | 56,445 |       |  |  | 112,110 |        |  |      | 62,694 |     |      |  | 31,801 |            |  |  | 259,892 |     |  |  | 121,544 |      
|Discontinued operations                            |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            |  |  |         |     |  |  |         |      
|Refinancing debt                                   |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            |  |  |         |     |  |  |         |      
|Merrill Lynch Mortgage Lending, Inc.  Floating    |                                                      |                  | 27,467  |                                     |      |  | 338    |       |  |  | 27,129  |        |  |      |       |     |      |  |       |            |  |  |        |     |  |  |        |      
|Long-term debt  other(2)                          |                                                      |                  | 132     |                                     |      |  | 25     |       |  |  | 25      |        |  |      | 25     |     |      |  | 25     |            |  |  | 25      |     |  |  | 7       |      
|Interest Expense(3)                                |                                                      |                  | 2,540   |                                     |      |  | 1,608  |       |  |  | 932     |        |  |      |       |     |      |  |       |            |  |  |        |     |  |  |        |      
|Ground and parking lease obligations               |                                                      |                  | 2,438   |                                     |      |  | 294    |       |  |  | 302     |        |  |      | 290    |     |      |  | 252    |            |  |  | 252     |     |  |  | 1,048   |      
|                                                   |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            | 
|                                                   | Total obligations related to discontinued operations |                  |         | 32,577                              |      |  |        | 2,265 |  |  |         | 28,388 |  |      |        | 315 |      |  |        | 277        |  |  |         | 277 |  |  |         | 1,055 | 
|                                                   |                                                      |                  |         |                                     |      |  |        |       |  |  |         |        |  |      |        |     |      |  |        |            | 






|    |                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Discussed in Note 11, Long-Term Obligations in the
    notes to our consolidated condensed financial statements.                                                                           
|   
|(2) | Comprised of unsecured notes payable of $3.3 million for
    pre-bankruptcy related tax obligations and $1.9 million of
    other obligations.                                               
|   
|(3) | The computation of interest expense related to our variable rate
    debt assumes a LIBOR of 2.4% for all periods and for the fixed
    rate debt we assume the respective contractual rates.
|   
|(4) | Purchase obligation is for a management fee agreement expiring
    December 2030.                                                                                                            





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Franchise fees  Substantially all of our franchise
    fees vary with revenues. Franchise fees expense for 2004
    relating to continuing operations are shown under the caption
    Franchise Agreements and Capital Expenditures;                                                                                                                                                                                                                                      
|
| |  | Equipment rentals and costs relating to our maintenance
    contracts  These items are of a short-term nature and
    are cancelable by us. For 2004, costs relating to equipment
    rentals were approximately $1.5 million for continuing
    operations and $0.2 million for discontinued operations and
    costs relating to maintenance contracts were approximately
    $2.9 million for continuing operations and
    $0.5 million for discontinued operations; and
|
| |  | Other purchase obligations  As of December 31,
    2004, other than purchase obligations included in note 4
    above, we had no material purchase obligations.                                                                                                                                                                                                                                                                                                             

Mortgage Debt






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62



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





63



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



|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |         |  |                                   |                  |  | 
|------------------------------------------------------------- | -------------------------- | --------- | -- | ----------------- | ------------------- | - | ------- | -------------- |  | - | -------------- | ------- |  | --------------------------------- | ---------------- |  | 
|                                                              |                            |           |    | December 31, 2004 |                     |   |        
|                                                              |                            |           |    |                   |                     |   |        
|                                                              |                            | Number    |    |                   | Property, plant and |   |         | Debt           |  |   |               
|                                                              |                            | of Hotels |    |                   | equipment, net(1)   |   |         | obligations(1) |  |   | Interest rates |        
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        
|                                                              |                            |           |    | ($ in thousands)  |                     |   |        
|Refinancing Debt                                              |                            |           |    |                   |                     |   |         |                |  |   |                |         |  |                                   |                  | 
|Merrill Lynch Mortgage Lending, Inc.  Floating               |                            |           | 26 |                   |                     | $ | 114,925 |                |  | $ | 102,617        |         |  |                                   | LIBOR plus 3.40% | 
|Merrill Lynch Mortgage Lending, Inc.  Fixed                  |                            |           | 35 |                   |                     |   | 315,317 |                |  |   | 258,410        |         |  |                                   | 6.58%            | 
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        
|Merrill Lynch Mortgage Lending, Inc.  Total                  |                            |           | 61 |                   |                     |   | 430,242 |                |  |   | 361,027        |         |  |                                   |                  | 
|Computershare Trust Company of Canada                         |                            |           | 1  |                   |                     |   | 15,907  |                |  |   | 7,843          |         |  |                                   | 7.88%            | 
|Other financing                                               |                            |           |    |                   |                     |   |         |                |  |   |                |         |  |                                   |                  | 
|Column Financial, Inc.                                        |                            |           | 9  |                   |                     |   | 65,704  |                |  |   | 25,058         |         |  |                                   | 10.59%           | 
|Lehman Brothers Holdings, Inc.                                |                            |           | 5  |                   |                     |   | 37,131  |                |  |   | 22,927         |         |  | $16,154 at 9.40%; $6,773 at 8.90%
|JP Morgan Chase Bank, Trustee                                 |                            |           | 2  |                   |                     |   | 7,884   |                |  |   | 10,110         |         |  |                                   | 8.00%            | 
|DDL Kinser                                                    |                            |           | 1  |                   |                     |   | 3,123   |                |  |   | 2,286          |         |  |                                   | 8.25%            | 
|Column Financial, Inc.                                        |                            |           | 1  |                   |                     |   | 11,544  |                |  |   | 8,545          |         |  |                                   | 9.45%            | 
|Column Financial, Inc.                                        |                            |           | 1  |                   |                     |   | 5,984   |                |  |   | 3,069          |         |  |                                   | 10.74%           | 
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        
|                                                              | Total  other financing    |           |    | 19                |                     |   |         | 131,370        |  |   |                | 71,995  |  |                                   |                  |  | 
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        
|                                                              |                            |           | 81 |                   |                     |   | 577,519 |                |  |   | 440,865        |         |  |                                   | 6.91%(2)         | 
|Long-term debt  other                                        |                            |           |    |                   |                     |   |         |                |  |   |                |         |  |                                   |                  | 
|Tax notes issued pursuant to our Joint Plan of Reorganization |                            |           |   |                   |                     |   |        |                |  |   | 3,302          |         |  |                                   |                  | 
|Other                                                         |                            |           |   |                   |                     |   |        |                |  |   | 1,865          |         |  |                                   |                  | 
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        
|                                                              |                            |           |   |                   |                     |   |        |                |  |   | 5,167          |         |  |                                   |                  | 
|Property, plant and equipment  unencumbered                  |                            |           | 4  |                   |                     |   | 20,059  |                |  |   |               |         |  |                                   |                  | 
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        
|                                                              |                            |           | 85 |                   |                     |   | 597,578 |                |  |   | 446,032        |         |  |                                   |                  | 
|Held for sale(2)                                              |                            |           | (7 | )                 |                     |   | (28,207 | )              |  |   | (27,599        | )       |  |                                   |                  | 
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        
|                                                              | Total December 31, 2004(3) |           |    | 78                |                     |   | $       | 569,371        |  |   | $              | 418,433 |  |                                   |                  |  | 
|                                                              |                            |           |    |                   |                     |   |         |                |  |   |                |        






|    |                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Debt obligations and property, plant and equipment of one hotel
    in which we have a non-controlling equity interest that we do
    not consolidate are excluded from the table above.
|   
|(2) | The 6.91% in the table above represents our annual weighted
    average cost of debt at December 31, 2004, using a LIBOR of
    2.4% as of December 31, 2004.                           
|   
|(3) | Debt obligations at December 31, 2004 include the current
    portion.                                                                                                                  

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











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





65



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|                        |  |                  |        |  |      |          |        |        |  |   |        | 
|----------------------- |  | ---------------- | ------ |  | ---- | -------- | ------ | ------ |  | - | ------ | 
|                        |  |                  |        |  |      | 2002     |       
|                        |  |                  |        |  |      | Combined |       
|                        |  | 2004             |        |  | 2003 |          |        | Period | 
|                        |  |                  |        |  |      |          |        |        | 
|                        |  | ($ in thousands) |       
|Continuing operations   |  | $                | 21,951 |  |      | $        | 20,569 |        |  | $ | 20,996 | 
|Discontinued operations |  |                  | 2,410  |  |      |          | 3,816  |        |  |   | 5,303  | 
|                        |  |                  |        |  |      |          |        |        | 
|                        |  | $                | 24,361 |  |      | $        | 24,385 |        |  | $ | 26,299 | 
|                        |  |                  |        |  |      |          |        |        | 











| |   |                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Five of these hotels are held for sale;                                                                                                                                                                                                                                 
|
| |  | Seven of the remaining hotels either just completed a major
    renovation, are undergoing a major renovation or a major
    renovation is planned, and the total cost of the renovations is
    projected to be $22.8 million of which $7.6 million
    has been spent;
|
| |  | One of the remaining hotels has a franchise agreement that
    expires in 2005 and is expected to be renovated upon selection
    of a new franchise. The total cost of the renovation will not be
    known until the franchisor inspects the property;                
|
| |  | Four of the remaining hotels are expected to be in full
    compliance with their franchise agreements during the next
    testing period;                                                                                                                              
|
| |  | Two of the remaining hotels are above the required franchise
    thresholds and must remain above those levels until February
    2006 to receive a clean slate letter;                                                                                               

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| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | One of the remaining hotels has implemented plans to improve
    service levels to return to compliance levels; and                                                                                                                                                                             
|
| |  | One hotel, which is 60% owned by the company, will undergo a
    major renovation after we complete the buyout of our minority
    partner in the second quarter of 2005. The renovation is
    expected to be completed in the first quarter of 2006 and is
    estimated to cost $3.1 million.











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Off Balance Sheet Arrangements




New Accounting Pronouncements












68



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















69



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##### Table of Contents










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








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








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

Evaluation of Disclosure, Controls and Procedures.


Changes in Internal Control.


Managements Report on Internal Control over Financial
Reporting.










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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Internal Control  Integrated Framework








Internal
Control  Integrated Framework Internal Control  Integrated
Framework




Deloitte & Touche
LLP






71



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|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







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








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








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








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








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services






PART IV







|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules





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



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



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



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

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SIGNATURES






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



| |     |                         
| | --- | ------------------------
| | By: | /s/ W. Thomas Parrington

| |                                      
| | -------------------------------------
| |                                      
| | W. Thomas Parrington                 
| | President and Chief Executive Officer



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

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




|                                                                                                                                                                                                                                                                              |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                                                                                                                                              |  | Page |    
|                                                                                                                                                                                                                                                                              |  |      |    
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                                                                       |  |      | F-2 | 
|Consolidated Balance Sheets as of December 31, 2004 and
    December 31, 2003                                                                                                                                                                                                 |  |      | F-3 | 
|Consolidated Statements of Operations for the Successor years
    ended December 31, 2004 and December 31, 2003, the
    Successor period November 23, 2002 to December 31,
    2002, and the Predecessor period January 1, 2002 to
    November 22, 2002                     |  |      | F-4 | 
|Consolidated Statements of Stockholders Equity (Deficit)
    for the Successor years ended December 31, 2004 and
    December 31, 2003, the Successor period November 23,
    2002 to December 31, 2002, and the Predecessor period
    January 1, 2002 to November 22, 2002 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the Successor years
    ended December 31, 2004 and December 31, 2003, the
    Successor period November 23, 2002 to December 31,
    2002, and the Predecessor period January 1, 2002 to
    November 22, 2002                     |  |      | F-6 | 
|Notes to the Consolidated Financial Statements                                                                                                                                                                                                                                |  |      | F-7 | 



F-1



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




















Deloitte & Touche
LLP






F-2



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                     |                                                                                                                                                              |                                     |         |         |                   |   |         |         |         | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------- | ------- | ------- | ----------------- | - | ------- | ------- | ------- | 
|                                     |                                                                                                                                                              | December 31, 2004                   |         |         | December 31, 2003 |  
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     |                                                                                                                                                              | ($ in thousands, except share data) |        
|ASSETS                              
|Current assets:                      |                                                                                                                                                              |                                     |         |         |                   |   |         |        
|                                     | Cash and cash equivalents                                                                                                                                    |                                     | $       | 36,234  |                   |   | $       | 10,897  |        
|                                     | Cash, restricted                                                                                                                                             |                                     |         | 9,840   |                   |   |         | 7,084   |        
|                                     | Accounts receivable (net of allowances: 2004  $684;
    2003  $689)                                                                                        |                                     |         | 7,967   |                   |   |         | 8,169   |        
|                                     | Insurance receivable                                                                                                                                         |                                     |         | 3,280   |                   |   |         |        |        
|                                     | Inventories                                                                                                                                                  |                                     |         | 6,293   |                   |   |         | 5,609   |        
|                                     | Prepaid expenses and other current assets                                                                                                                    |                                     |         | 17,232  |                   |   |         | 17,068  |        
|                                     | Assets held for sale                                                                                                                                         |                                     |         | 30,528  |                   |   |         | 68,567  |        
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     |                                                                                                                                                              | Total current assets                |         |         | 111,374           |   |         |         | 117,394 | 
|Property and equipment, net          |                                                                                                                                                              |                                     | 569,371 |         |                   |   | 563,818 |        
|Deposits for capital expenditures    |                                                                                                                                                              |                                     | 34,787  |         |                   |   | 15,782  |        
|Other assets                         |                                                                                                                                                              |                                     | 7,775   |         |                   |   | 12,180  |        
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     |                                                                                                                                                              | $                                   | 723,307 |         |                   | $ | 709,174 |        
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                                                              |                                     |         |         |                   |   |         |        
|                                     | Accounts payable                                                                                                                                             |                                     | $       | 10,957  |                   |   | $       | 7,131   |        
|                                     | Other accrued liabilities                                                                                                                                    |                                     |         | 33,475  |                   |   |         | 31,432  |        
|                                     | Advance deposits                                                                                                                                             |                                     |         | 1,638   |                   |   |         | 1,882   |        
|                                     | Current portion of long-term liabilities                                                                                                                     |                                     |         | 25,290  |                   |   |         | 16,563  |        
|                                     | Liabilities related to assets held for sale                                                                                                                  |                                     |         | 30,541  |                   |   |         | 57,948  |        
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     |                                                                                                                                                              | Total current liabilities           |         |         | 101,901           |   |         |         | 114,956 | 
|Long-term liabilities:               |                                                                                                                                                              |                                     |         |         |                   |   |         |        
|                                     | 12.25% Cumulative preferred shares subject to mandatory
    redemption                                                                                       |                                     |         |        |                   |   |         | 142,177 |        
|                                     | Other long-term liabilities                                                                                                                                  |                                     |         | 393,143 |                   |   |         | 409,115 |        
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     |                                                                                                                                                              | Total long-term liabilities         |         |         | 393,143           |   |         |         | 551,292 | 
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     | Total liabilities                                                                                                                                            |                                     |         | 495,044 |                   |   |         | 666,248 |        
|Minority interests                   |                                                                                                                                                              |                                     | 1,629   |         |                   |   | 2,320   |        
|Commitments and contingencies        |                                                                                                                                                              |                                     |         |         |                   |   |         |        
|Stockholders equity:                |                                                                                                                                                              |                                     |         |         |                   |   |         |        
|                                     | Common stock, $.01 par value, 60,000,000 shares
    authorized; 24,579,255 and 2,333,591 issued at December 31,
    2004 and December 31, 2003, respectively |                                     |         | 246     |                   |   |         | 23      |        
|                                     | Additional paid-in capital                                                                                                                                   |                                     |         | 306,943 |                   |   |         | 89,874  |        
|                                     | Unearned stock compensation                                                                                                                                  |                                     |         | (315    | )                 |   |         | (508    | )      
|                                     | Accumulated deficit                                                                                                                                          |                                     |         | (81,941 | )                 |   |         | (50,107 | )      
|                                     | Accumulated other comprehensive income                                                                                                                       |                                     |         | 1,777   |                   |   |         | 1,324   |        
|                                     | Treasury stock, at cost, 7,211 and nil shares at
    December 31, 2004 and December 31, 2003, respectively                                                   |                                     |         | (76     | )                 |   |         |        |        
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     |                                                                                                                                                              | Total stockholders equity          |         |         | 226,634           |   |         |         | 40,606  | 
|                                     |                                                                                                                                                              |                                     |         |         |                   |  
|                                     |                                                                                                                                                              | $                                   | 723,307 |         |                   | $ | 709,174 |        
|                                     |                                                                                                                                                              |                                     |         |         |                   |  



F-3



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |         |         |  
|---------------------------------------------------------------------------------- | -------------------------------------------------------------- | --------------------------------------- | ------- | -------------------- | ----------- | - | ------------------ | ----------------- | ------- | - | ----------------- | ------- | ------ | - | ------- | ------- | ------- | -
|                                                                                   |                                                                | Successor                               |         |                      | Predecessor |  
|                                                                                   |                                                                |                                         |         |                      |             |  
|                                                                                   |                                                                |                                         |         | November 23, 2002 to |             |   | January 1, 2002 to |                  
|                                                                                   |                                                                | 2004                                    |         |                      | 2003        |   |                    | December 31, 2002 |         |   | November 22, 2002 |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   |                                                                | ($ in thousands, except per share data) |         |                      |            
|Revenues:                                                                          |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |        
|                                                                                   | Rooms                                                          |                                         | $       | 238,946              |             |   | $                  | 229,519           |         |   | $                 | 16,902  |        |   | $       | 220,898 |        
|                                                                                   | Food and beverage                                              |                                         |         | 72,429               |             |   |                    | 70,791            |         |   |                   | 7,415   |        |   |         | 66,709  |        
|                                                                                   | Other                                                          |                                         |         | 10,734               |             |   |                    | 11,104            |         |   |                   | 989     |        |   |         | 11,660  |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   |                                                                |                                         | 322,109 |                      |             |   | 311,414            |                   |         |   | 25,306            |         |        |   | 299,267 |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|Operating expenses:                                                                |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |        
|                                                                                   | Direct:                                                        |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |         |        
|                                                                                   |                                                                | Rooms                                   |         |                      | 68,054      |   |                    |                   | 65,814  |   |                   |         | 6,246  |   |         |         | 59,378  |  
|                                                                                   |                                                                | Food and beverage                       |         |                      | 51,067      |   |                    |                   | 48,686  |   |                   |         | 5,447  |   |         |         | 46,822  |  
|                                                                                   |                                                                | Other                                   |         |                      | 8,029       |   |                    |                   | 7,970   |   |                   |         | 880    |   |         |         | 7,836   |  
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   |                                                                |                                         | 127,150 |                      |             |   | 122,470            |                   |         |   | 12,573            |         |        |   | 114,036 |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   |                                                                |                                         | 194,959 |                      |             |   | 188,944            |                   |         |   | 12,733            |         |        |   | 185,231 |        
|Other operating expenses:                                                          |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |        
|                                                                                   | Other hotel operating costs                                    |                                         |         | 97,261               |             |   |                    | 91,982            |         |   |                   | 8,883   |        |   |         | 82,375  |        
|                                                                                   | Property and other taxes, insurance and leases                 |                                         |         | 21,884               |             |   |                    | 25,014            |         |   |                   | 3,298   |        |   |         | 20,162  |        
|                                                                                   | Corporate and other                                            |                                         |         | 17,263               |             |   |                    | 20,892            |         |   |                   | 1,801   |        |   |         | 15,675  |        
|                                                                                   | Casualty losses                                                |                                         |         | 2,313                |             |   |                    |                  |         |   |                   |        |        |   |         |        |        
|                                                                                   | Depreciation and amortization                                  |                                         |         | 27,376               |             |   |                    | 29,761            |         |   |                   | 3,113   |        |   |         | 40,523  |        
|                                                                                   | Impairment of long-lived assets                                |                                         |         | 7,416                |             |   |                    | 12,667            |         |   |                   |        |        |   |         |        |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   |                                                                | Other operating expenses                |         |                      | 173,513     |   |                    |                   | 180,316 |   |                   |         | 17,095 |   |         |         | 158,735 |  
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   |                                                                |                                         | 21,446  |                      |             |   | 8,628              |                   |         |   | (4,362            | )       |        |   | 26,496  |        
|Other income (expenses):                                                           |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |        
|Interest income and other                                                          |                                                                |                                         | 681     |                      |             |   | 807                |                   |         |   | 14                |         |        |   | 4,940   |        
|Gain on asset dispositions                                                         |                                                                |                                         |        |                      |             |   | 445                |                   |         |   |                  |         |        |   |        |        
|Interest expense and other financing costs:                                        |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |        
|                                                                                   |                                                                | Preferred stock dividend                |         |                      | (9,383      | ) |                    |                   | (8,092  | ) |                   |         |       |   |         |         |        |  
|                                                                                   |                                                                | Interest expense                        |         |                      | (42,990     | ) |                    |                   | (28,581 | ) |                   |         | (2,512 | ) |         |         | (25,761 | )
|                                                                                   |                                                                | Loss on preferred stock redemption      |         |                      | (6,063      | ) |                    |                   |        |   |                   |         |       |   |         |         |        |  
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|(Loss) income before income taxes, reorganization items and
    minority interests |                                                                |                                         | (36,309 | )                    |             |   | (26,793            | )                 |         |   | (6,860            | )       |        |   | 5,675   |        
|Reorganization items                                                               |                                                                |                                         |        |                      |             |   | (1,397             | )                 |         |   |                  |         |        |   | 11,038  |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|(Loss) income before income taxes and minority interests                           |                                                                |                                         | (36,309 | )                    |             |   | (28,190            | )                 |         |   | (6,860            | )       |        |   | 16,713  |        
|(Provision) benefit for income taxes  continuing
    operations                   |                                                                |                                         | (228    | )                    |             |   | (178               | )                 |         |   | (32               | )       |        |   | 160     |        
|Minority interests (net of taxes, nil)                                             |                                                                |                                         | 691     |                      |             |   | 1,294              |                   |         |   | 147               |         |        |   | 126     |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|(Loss) income from continuing operations                                           |                                                                |                                         | (35,846 | )                    |             |   | (27,074            | )                 |         |   | (6,745            | )       |        |   | 16, 999 |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|Discontinued operations:                                                           |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |        
|                                                                                   | (Loss) income from discontinued operations before income taxes |                                         |         | 4,012                |             |   |                    | (4,603            | )       |   |                   | (2,581  | )      |   |         | (5,833  | )      
|                                                                                   | Income tax benefit                                             |                                         |         |                     |             |   |                    |                  |         |   |                   |        |        |   |         | 1,200   |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   | (Loss) income from discontinued operations                     |                                         |         | 4,012                |             |   |                    | (4,603            | )       |   |                   | (2,581  | )      |   |         | (4,633  | )      
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   | Net (loss) income                                              |                                         |         | (31,834              | )           |   |                    | (31,677           | )       |   |                   | (9,326  | )      |   |         | 12,366  |        
|                                                                                   | Preferred stock dividend                                       |                                         |         |                     |             |   |                    | (7,594            | )       |   |                   | (1,510  | )      |   |         |        |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|                                                                                   | Net (loss) income attributable to common stock                 |                                         | $       | (31,834              | )           |   | $                  | (39,271           | )       |   | $                 | (10,836 | )      |   | $       | 12,366  |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        
|Basic and diluted loss per common share:                                           |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |         |        |   |         |        
|                                                                                   | Net (loss) income attributable to common stock                 |                                         | $       | (2.30                | )           |   | $                  | (16.83            | )       |   | $                 | (4.64   | )      |   | $       | 0.43    |        
|                                                                                   |                                                                |                                         |         |                      |             |   |                    |                   |         |   |                   |        



F-4



---



##### Table of Contents



LODGIAN, INC AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(DEFICIT)


|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |     |  |   |        |   |  |   |         |         |  
|----------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------- | ----------- | - | ---------- | - | ---- | -------- |  | ----------- | ------------ | - | ----- | ------------- | ------- | - | ------------- | ----- | -------- | ------------- | - | - | ---------------- | --- |  | - | ------ | - |  | - | ------- | ------- | -
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  | Accumulated |              |   |       |               |        
|                                                                  |                                                                   | Common Stock                        |             |   | Additional |   |      | Unearned |  |             |              |   | Other |               |         |   |               | Total |         
|                                                                  |                                                                   |                                     |             |   | Paid-In    |   |      | Stock    |  |             | Accumulated  |   |       | Comprehensive |         |   | Treasury      |       |          | Stockholders |  
|                                                                  |                                                                   | Shares                              |             |   | Amount     |   |      | Capital  |  |             | Compensation |   |       | Deficit       |         |   | Income (Loss) |       |          | Stock         |   |   | Equity (Deficit) |    
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    
|                                                                  |                                                                   | ($ in thousands, except share data) |            
|Predecessor Company:                                              |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |     |  |   |        |   |  |   |         |        
|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 income                                              |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |     |  |   |        |   |  |   | 12,467  |        
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    
|Balance at November 22, 2002                                      |                                                                   |                                     | 28,479,837  |   |            |   | 284  |          |  |             | 263,320      |   |       |               |        |   |               |       | (255,94  | )             |   |   | (1,878           | )   |  |   |       |   |  |   | 5,786   |        
|Reorganization adjustments                                        |                                                                   |                                     | (28,479,837 | ) |            |   | (284 | )        |  |             |             |   |       |               | 255,940 |   |               |       | 1,878    |               |   |   |                 |     |  |   | (5,786 | ) |  |   |         |        
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    
|Balance November 22, 2002                                         |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   |        |        
|                                                                 
|Successor Company:                                                |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |     |  |   |        |   |  |   |         |        
|Distribution of new common shares                                 |                                                                   |                                     | 2,333,333   |   |            |   | 23   |          |  |             | 81,233       |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 81,256  |        
|Distribution of A warrants, 503,546                               |                                                                   |                                     |            |   |            |   |     |          |  |             | 4,774        |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 4,774   |        
|Distribution of B warrants, 343,122                               |                                                                   |                                     |            |   |            |   |     |          |  |             | 3,263        |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 3,263   |        
|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                                         |                                                                   |                                     | 2,333,333   |   |            | $ | 23   |          |  | $           | 89,270       |   |       | $             |        |   |               | $     | (10,836  | )             |   | $ |                 |     |  | $ |       |   |  | $ | 78,457  |        
|Issuance of restricted stock                                      |                                                                   |                                     |            |   |            |   |     |          |  |             | 600          |   |       |               | (600    | ) |               |       |         |               |   |   |                 |     |  |   |       |   |  |   |        |        
|Amortization of unearned stock compensation                       |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               | 92      |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 92      |        
|Exercise of stock options                                         |                                                                   |                                     | 258         |   |            |   |     |          |  |             | 4            |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 4       |        
|Comprehensive loss:                                               |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |     |  |   |        |   |  |   |         |        
|Net loss                                                          |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               |        |   |               |       | (31,677  | )             |   |   |                 |     |  |   |       |   |  |   | (31,677 | )      
|Currency translation adjustments (related taxes estimated at nil) |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               |        |   |               |       |         |               |   |   | 1,324            |     |  |   |       |   |  |   | 1,324   |        
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    
|Total comprehensive loss                                          |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               |         |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | (30,353 | )      
|Preferred dividends                                               |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               |        |   |               |       | (7,594   | )             |   |   |                 |     |  |   |       |   |  |   | (7,594  | )      
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    
|Balance December 31, 2003                                         |                                                                   |                                     | 2,333,591   |   |            | $ | 23   |          |  | $           | 89,874       |   |       | $             | (508    | ) |               | $     | (50,107  | )             |   | $ | 1,324            |     |  | $ |       |   |  | $ | 40,606  |        
|Fractional shares cancelled on reverse stock split                |                                                                   |                                     | (971        | ) |            |   |     |          |  |             | (5           | ) |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | (5      | )      
|Issuance of restricted stock                                      |                                                                   |                                     |            |   |            |   |     |          |  |             | 25           |   |       |               | (25     | ) |               |       |         |               |   |   |                 |     |  |   |       |   |  |   |        |        
|Issuance of new common shares                                     |                                                                   |                                     | 18,285,714  |   |            |   | 183  |          |  |             | 175,704      |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 175,887 |        
|Surrender of unexchanged shares                                   |                                                                   |                                     | (2,657      | ) |            |   |     |          |  |             |             |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   |        |        
|Amortization of unearned stock compensation                       |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               | 218     |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 218     |        
|Exercise of stock options                                         |                                                                   |                                     | 241         |   |            |   |     |          |  |             | 4            |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 4       |        
|Exchange of preferred shares for common shares                    |                                                                   |                                     | 3,941,115   |   |            |   | 40   |          |  |             | 41,341       |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   | 41,381  |        
|Vesting of restricted stock units                                 |                                                                   |                                     | 22,222      |   |            |   |     |          |  |             |             |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   |       |   |  |   |        |        
|Treasury stock (7,211 shares)                                     |                                                                   |                                     |            |   |            |   |     |          |  |             |             |   |       |               |        |   |               |       |         |               |   |   |                 |     |  |   | (76    | ) |  |   | (76     | )      
|Comprehensive loss:                                               |                                                                   |                                     |            |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |     |  |   |        |   |  |   |         |        
|                                                                  | Net loss                                                          |                                     |             |  |            |   |      |         |  |             |              |  |       |               |         |  |               |       |          | (31,834       | ) |   |                  |    |  |   |        |  |  |   |         | (31,834 | )
|                                                                  | Currency translation adjustments (related taxes estimated at nil) |                                     |             |  |            |   |      |         |  |             |              |  |       |               |         |  |               |       |          |              |   |   |                  | 453 |  |   |        |  |  |   |         | 453     |  
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    
|Total comprehensive loss                                          |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |     |  |   |        |   |  |   | (31,381 | )      
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    
|Balance December 31, 2004                                         |                                                                   |                                     | 24,579,255  |   |            | $ | 246  |          |  | $           | 306,943      |   |       | $             | (315    | ) |               | $     | (81,941  | )             |   | $ | 1,777            |     |  | $ | (76    | ) |  | $ | 226,634 |        
|                                                                  |                                                                   |                                     |             |   |            |   |      |          |  |             |              |   |       |               |         |   |               |       |          |               |   |   |                  |    










F-5



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |          |          |         |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------------------ | -------------------------------------------------- | -------------------- | ----------- | ------ | ------------------ | ----------------- | ------ | ------ | ----------------- | ------ | ----- | ------- | ------- | -------- | -------- | ------- | -
|                                                                                |                                                                                                        | Successor                                              |                                                    |                      | Predecessor |       
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |       
|                                                                                |                                                                                                        |                                                        |                                                    | November 23, 2002 to |             |        | January 1, 2002 to |                  
|                                                                                |                                                                                                        | 2004                                                   |                                                    |                      | 2003        |        |                    | December 31, 2002 |        |        | November 22, 2002 |       
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|                                                                                |                                                                                                        |                                                        |                                                    | ($ in thousands)     |             |        |                   
|Operating activities:                                                           |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |         
|                                                                                | Net (loss) income                                                                                      |                                                        | $                                                  | (31,834              | )           |        | $                  | (31,677           | )      |        | $                 | (9,326 | )     |         | $       | 12,366   |         
|                                                                                | Adjustments to reconcile net (loss) income to net cash
    provided by (used in) operating activities: |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |          |         
|                                                                                |                                                                                                        | Depreciation and amortization                          |                                                    |                      | 27,616      |        |                    |                   | 33,128 |        |                   |        | 3,970 |         |         |          | 53,224   |        
|                                                                                |                                                                                                        | Impairment of long-lived assets                        |                                                    |                      | 12,112      |        |                    |                   | 18,054 |        |                   |        |      |         |         |          | 222,071  |        
|                                                                                |                                                                                                        | Gain on extinguishment of debt                         |                                                    |                      |            |        |                    |                   |       |        |                   |        |      |         |         |          | (260,838 | )      
|                                                                                |                                                                                                        | Fresh start adjustments  other                        |                                                    |                      |            |        |                    |                   |       |        |                   |        |      |         |         |          | (3,938   | )      
|                                                                                |                                                                                                        | Amortization of unearned stock compensation            |                                                    |                      | 218         |        |                    |                   | 92     |        |                   |        |      |         |         |          |         |        
|                                                                                |                                                                                                        | Preferred stock dividends                              |                                                    |                      | 9,383       |        |                    |                   | 8,092  |        |                   |        |      |         |         |          |         |        
|                                                                                |                                                                                                        | Loss on redemption of preferred stock                  |                                                    |                      | 6,063       |        |                    |                   |       |        |                   |        |      |         |         |          |         |        
|                                                                                |                                                                                                        | Casualty losses                                        |                                                    |                      | 2,313       |        |                    |                   |       |        |                   |        |      |         |         |          |         |        
|                                                                                |                                                                                                        | Minority interests                                     |                                                    |                      | (691        | )      |                    |                   | (1,296 | )      |                   |        | (147  | )       |         |          | (126     | )      
|                                                                                |                                                                                                        | Gain on asset dispositions                             |                                                    |                      | (9,168      | )      |                    |                   | (3,530 | )      |                   |        |      |         |         |          |         |        
|                                                                                |                                                                                                        | Write-off and amortization of deferred financing costs |                                                    |                      | 11,210      |        |                    |                   | 4,916  |        |                   |        | 167   |         |         |          | 56       |        
|                                                                                |                                                                                                        | Other                                                  |                                                    |                      | (125        | )      |                    |                   | (225   | )      |                   |        | (381  | )       |         |          | 213      |        
|                                                                                |                                                                                                        | Changes in operating assets and liabilities:           |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |          |          |        
|                                                                                |                                                                                                        |                                                        | Accounts receivable, net of allowances             |                      |             | 958    |                    |                   |        | 1,262  |                   |        |       | 3,821   |         |          |          | (2,013  | )
|                                                                                |                                                                                                        |                                                        | Inventories                                        |                      |             | (496   | )                  |                   |        | 211    |                   |        |       | 126     |         |          |          | (100    | )
|                                                                                |                                                                                                        |                                                        | Prepaid expenses, other assets and restricted cash |                      |             | (2,331 | )                  |                   |        | 9,311  |                   |        |       | 14,795  |         |          |          | (39,795 | )
|                                                                                |                                                                                                        |                                                        | Accounts payable                                   |                      |             | (181   | )                  |                   |        | (4,824 | )                 |        |       | (1,797  | )       |          |          | 1,604   |  
|                                                                                |                                                                                                        |                                                        | Other accrued liabilities                          |                      |             | (1,386 | )                  |                   |        | (6,745 | )                 |        |       | (11,025 | )       |          |          | 15,611  |  
|                                                                                |                                                                                                        |                                                        | Advance deposits                                   |                      |             | (487   | )                  |                   |        | 486    |                   |        |       | (303    | )       |          |          | 318     |  
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Net cash provided by (used in) operating activities                             |                                                                                                        |                                                        | 23,174                                             |                      |             |        | 27,255             |                   |        |        | (100              | )      |       |         | (1,347  | )       
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Investing activities:                                                           |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |         
|                                                                                | Capital improvements                                                                                   |                                                        |                                                    | (37,240              | )           |        |                    | (35,350           | )      |        |                   | (4,808 | )     |         |         | (23,290  | )       
|                                                                                | Proceeds from sale of assets, net of related selling costs, and
    land condemnation                  |                                                        |                                                    | 42,493               |             |        |                    | 13,145            |        |        |                   |       |       |         |         |         |         
|                                                                                | Acquisitions of property and equipment                                                                 |                                                        |                                                    | (5,363               | )           |        |                    |                  |        |        |                   |       |       |         |         |         |         
|                                                                                | (Deposits) withdrawals for capital expenditures                                                        |                                                        |                                                    | (18,990              | )           |        |                    | 6,896             |        |        |                   | (7,656 | )     |         |         | 2,160    |         
|                                                                                | Insurance advances related to hurricanes                                                               |                                                        |                                                    | 2,000                |             |        |                    |                  |        |        |                   |       |       |         |         |         |         
|                                                                                | Other                                                                                                  |                                                        |                                                    | (598                 | )           |        |                    | (261              | )      |        |                   | (1,010 | )     |         |         | (758     | )       
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Net cash used in investing activities                                           |                                                                                                        |                                                        | (17,698                                            | )                    |             |        | (15,570            | )                 |        |        | (13,474           | )      |       |         | (21,888 | )       
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Financing activities:                                                           |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |         
|                                                                                | Proceeds from issuance of long term debt                                                               |                                                        |                                                    | 370,000              |             |        |                    | 80,000            |        |        |                   |       |       |         |         | 309,098  |         
|                                                                                | Proceeds from working capital revolver                                                                 |                                                        |                                                    |                     |             |        |                    | 2,000             |        |        |                   |       |       |         |         |         |         
|                                                                                | Proceeds from exercise of stock options and issuance of common
    stock                               |                                                        |                                                    | 175,890              |             |        |                    | 114               |        |        |                   |       |       |         |         |         |         
|                                                                                | Shares redeemed from reverse stock split                                                               |                                                        |                                                    | (5                   | )           |        |                    |                  |        |        |                   |       |       |         |         |         |         
|                                                                                | Preferred stock redemption payments                                                                    |                                                        |                                                    | (114,043             | )           |        |                    |                  |        |        |                   |       |       |         |         |         |         
|                                                                                | Purchase of Treasury stock                                                                             |                                                        |                                                    | (76                  | )           |        |                    |                  |        |        |                   |       |       |         |         |         |         
|                                                                                | Principal payments on long-term debt                                                                   |                                                        |                                                    | (406,515             | )           |        |                    | (87,059           | )      |        |                   | (1,221 | )     |         |         | (266,601 | )       
|                                                                                | Principal payments on working capital revolver                                                         |                                                        |                                                    |                     |             |        |                    | (2,000            | )      |        |                   |       |       |         |         |         |         
|                                                                                | Payments of deferred financing costs                                                                   |                                                        |                                                    | (5,417               | )           |        |                    | (4,839            | )      |        |                   |       |       |         |         | (7,599   | )       
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Net cash provided by (used in) financing activities                             |                                                                                                        |                                                        | 19,834                                             |                      |             |        | (11,784            | )                 |        |        | (1,221            | )      |       |         | 34,898  |         
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Effect of exchange rate changes on cash                                         |                                                                                                        |                                                        | 27                                                 |                      |             |        | 121                |                   |        |        |                  |        |       |         |        |         
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Net increase (decrease) in cash and cash equivalents                            |                                                                                                        |                                                        | 25,337                                             |                      |             |        | 22                 |                   |        |        | (14,795           | )      |       |         | 11,663  |         
|Cash and cash equivalents at beginning of year                                  |                                                                                                        |                                                        | 10,897                                             |                      |             |        | 10,875             |                   |        |        | 25,670            |        |       |         | 14,007  |         
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Cash and cash equivalents at end of year                                        |                                                                                                        | $                                                      | 36,234                                             |                      |             | $      | 10,897             |                   |        | $      | 10,875            |        |       | $       | 25,670  |         
|                                                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |       
|Supplemental cash flow information:                                             |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |         
|Cash paid during the period for:                                                |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |         
|                                                                                | Interest, net of the amounts capitalized shown below                                                   |                                                        | $                                                  | 35,010               |             |        | $                  | 28,660            |        |        | $                 | 1,589  |       |         | $       | 31,132   |         
|                                                                                | Interest capitalized                                                                                   |                                                        |                                                    | 800                  |             |        |                    | 1,181             |        |        |                   | 149    |       |         |         | 365      |         
|                                                                                | Income taxes, net of refunds                                                                           |                                                        |                                                    | 483                  |             |        |                    | 237               |        |        |                   |       |       |         |         | (302     | )       
|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   |         
|                                                                                | Exchange of preferred shares for common shares                                                         |                                                        |                                                    | 41,381               |             |        |                    |                  |        |        |                   |       |       |         |         |         |         
|                                                                                | Net non-cash debt (decrease) increase                                                                  |                                                        |                                                    | 3,187                |             |        |                    | 4,678             |        |        |                   | 16     |       |         |         | 137      |         
|                                                                                | Equipment acquired through capital lease obligations                                                   |                                                        |                                                    | 51                   |             |        |                    |                  |        |        |                   |       |       |         |         |         |         
|Operating cash receipts and payments resulting from Chapter 11
    proceedings: |                                                                                                        |                                                        |                                                    |                      |             |        |                    |                   |        |        |                   |        |       |         |         |         
|                                                                                | Professional fees paid                                                                                 |                                                        |                                                    |                     |             |        |                    | (455              | )      |        |                   |       |       |         |         | (11,184  | )       
|                                                                                | Loan extension fee                                                                                     |                                                        |                                                    |                     |             |        |                    | (1,500            | )      |        |                   |       |       |         |         |         |         
|                                                                                | Other reorganization payments                                                                          |                                                        | $                                                  |                     |             |        | $                  | (90               | )      |        | $                 |       |       |         | $       | (908     | )       





F-6



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2004




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



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







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





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







F-7



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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; and                                                                                                                                             
|
| | 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.                             









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





| |   |                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Melbourne Hospitality Associates, Limited Partnership (which
    owns the Holiday Inn Melbourne, Florida)  This
    joint venture is in the form of a limited partnership, in which
    a Lodgian subsidiary serves as the general partner and has a 50%
    voting interest.                        
|
| |  | New Orleans Airport Motel Associates, Ltd. (which owns the
    New Orleans Airport Plaza Hotel and Conference Center,
    Louisiana)  This joint venture is in the form of
    a limited partnership, in which a Lodgian subsidiary serves as
    the general partner and has an 82% voting interest.
|
| |  | Servico Centre Associates, Ltd. (which owns the Crowne Plaza
    West Palm Beach, Florida)  This joint venture is
    in the form of a limited partnership, in which a Lodgian
    subsidiary serves as the general partner and has a 50% voting
    interest.                                       
|
| |  | Macon Hotel Associates, LLC (which owns the Crowne Plaza
    Macon, Georgia)  This joint venture is in the
    form of a limited liability company, in which a Lodgian
    subsidiary serves as the managing member and has a 60% voting
    interest.                                               

F-8



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








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





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





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







| |                                   
| | ----------------------------------
| | Acquisition of Hotels and Goodwill



F-9



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






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





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







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





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







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



F-10



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






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





| |                        
| | -----------------------
| | Comparative Information







| |                           
| | --------------------------
| | Cash Flow Statement Method





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







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



F-11



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








|                                            |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |        |   |  |   |        |  
|------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------- |  | ----------------------------------- | ----------------- |  | - | -------------------- | - |  | ----------------- | ------ | - |  | - | ------ | -
|                                            |                                                                                           | Successor         |  |                                     | Predecessor       | 
|                                            |                                                                                           |                   |  |                                     |                   | 
|                                            |                                                                                           | Year Ended        |  |                                     | Year Ended        |  |   | November 23, 2002 to |   |  | January 1         |       
|                                            |                                                                                           | December 31, 2004 |  |                                     | December 31, 2003 |  |   | December 31, 2002    |   |  | November 22, 2002 |       
|                                            |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |       
|                                            |                                                                                           |                   |  | ($ in thousands, except share data) |                   |  |  
|Income (loss) from continuing operations:   |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |        |   |  |   |       
|                                            | As reported                                                                               |                   |  | (35,846                             | )                 |  | $ | (27,074              | ) |  | $                 | (6,745 | ) |  | $ | 16,999 |  
|                                            | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |  | 218                                 |                   |  |   | 92                   |   |  |                   |       |   |  | $ |       |  
|                                            | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                   |  | (1,155                              | )                 |  |   | (705                 | ) |  |                   |       |   |  |   |       |  
|                                            |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |       
|                                            | Pro forma                                                                                 |                   |  | (36,783                             | )                 |  |   | (27,687              | ) |  |                   | (6,745 | ) |  |   | 16,999 |  
|Income (loss) from discontinued operations: |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |        |   |  |   |       
|                                            | As reported                                                                               |                   |  | 4,012                               |                   |  |   | (4,603               | ) |  |                   | (2,581 | ) |  |   | (4,633 | )
|                                            | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |  |                                    |                   |  |   |                     |   |  |                   |       |   |  |   |       |  
|                                            | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                   |  |                                    |                   |  |   |                     |   |  |                   |       |   |  |   |       |  
|                                            |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |       
|                                            | Pro forma                                                                                 |                   |  | 4,012                               |                   |  |   | (4,603               | ) |  |                   | (2,581 | ) |  |   | (4,633 | )
|Net income (loss):                          |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |        |   |  |   |       
|                                            | As reported                                                                               |                   |  | (31,834                             | )                 |  |   | (31,677              | ) |  |                   | (9,326 | ) |  |   | 12,366 |  
|                                            | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |  | 218                                 |                   |  |   | 92                   |   |  |                   |       |   |  |   |       |  
|                                            | Deduct: Total pro forma stock based employee compensation
    expense, net of tax effects |                   |  | (1,155                              | )                 |  |   | (705                 | ) |  |                   |       |   |  |   |       |  
|                                            |                                                                                           |                   |  |                                     |                   |  |   |                      |   |  |                   |       
|                                            | Pro forma                                                                                 |                   |  | (32,771                             | )                 |  |   | (32,290              | ) |  |                   | (9,326 | ) |  |   | 12,366 |  

F-12



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                                                                          |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |         |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------- | - | ----------------------------------- | ----------------- |  | - | -------------------- | - |  | ----------------- | ------- | - |  | - | ------ | -
|                                                                                                          |                                                                                           | Successor         |   |                                     | Predecessor       | 
|                                                                                                          |                                                                                           |                   |   |                                     |                   | 
|                                                                                                          |                                                                                           | Year Ended        |   |                                     | Year Ended        |  |   | November 23, 2002 to |   |  | January 1         |        
|                                                                                                          |                                                                                           | December 31, 2004 |   |                                     | December 31, 2003 |  |   | December 31, 2002    |   |  | November 22, 2002 |        
|                                                                                                          |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |        
|                                                                                                          |                                                                                           |                   |   | ($ in thousands, except share data) |                   |  |  
|Net income (loss) attributable to common stock:                                                           |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |         |   |  |   |       
|                                                                                                          | As reported                                                                               |                   |   | (31,834                             | )                 |  |   | (39,271              | ) |  |                   | (10,836 | ) |  |   | 12,366 |  
|                                                                                                          | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |   | 218                                 |                   |  |   | 92                   |   |  |                   |        |   |  |   |       |  
|                                                                                                          | Deduct: Total pro forma stock based employee compensation
    expense, net of tax effects |                   |   | (1,155                              | )                 |  |   | (705                 | ) |  |                   |        |   |  |   |       |  
|                                                                                                          |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |        
|                                                                                                          | Pro forma                                                                                 |                   |   | (32,771                             | )                 |  |   | (39,884              | ) |  |                   | (10,836 | ) |  |   | 12,366 |  
|Income (loss) from continuing operations attributable to common
    stock before discontinued operations: |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |         |   |  |   |       
|                                                                                                          | As reported                                                                               |                   |   | (35,846                             | )                 |  |   | (34,668              | ) |  |                   | (8,255  | ) |  |   | 16,999 |  
|                                                                                                          | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |   | 218                                 |                   |  |   | 92                   |   |  |                   |        |   |  |   |       |  
|                                                                                                          | Deduct: Total pro forma stock based employee compensation
    expense, net of tax effects |                   |   | (1,155                              | )                 |  |   | (705                 | ) |  |                   |        |   |  |   |       |  
|                                                                                                          |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |        
|                                                                                                          | Pro forma                                                                                 |                   |   | (36,783                             | )                 |  |   | (35,281              | ) |  |                   | (8,255  | ) |  |   | 16,999 |  
|Basic and diluted income (loss) per common share                                                          |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |         |   |  |   |       
|Income (loss) from continuing operations:                                                                 |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |         |   |  |   |       
|                                                                                                          | As reported                                                                               |                   | $ | (2.59                               | )                 |  | $ | (11.60               | ) |  | $                 | (2.89   | ) |  | $ | 0.60   |  
|                                                                                                          | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |   | 0.01                                |                   |  |   | 0.04                 |   |  |                   |        |   |  |   |       |  
|                                                                                                          | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                   |   | (0.08                               | )                 |  |   | (0.30                | ) |  |                   |        |   |  |   |       |  
|                                                                                                          |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |        
|                                                                                                          | Pro forma                                                                                 |                   |   | (2.66                               | )                 |  |   | (11.86               | ) |  |                   | (2.89   | ) |  |   | 0.60   |  
|Income (loss) from discontinued operations:                                                               |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |         |   |  |   |       
|                                                                                                          | As reported                                                                               |                   |   | 0.29                                |                   |  |   | (1.98                | ) |  |                   | (1.11   | ) |  |   | (0.17  | )
|                                                                                                          | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |   |                                    |                   |  |   |                     |   |  |                   |        |   |  |   |       |  
|                                                                                                          | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                   |   |                                    |                   |  |   |                     |   |  |                   |        |   |  |   |       |  
|                                                                                                          |                                                                                           |                   |   |                                     |                   |  |   |                      |   |  |                   |        
|                                                                                                          | Pro forma                                                                                 |                   |   | 0.29                                |                   |  |   | (1.98                | ) |  |                   | (1.11   | ) |  |   | (0.17  | )

F-13



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                                                                          |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |       |   |  |  |      | 
|--------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------- |  | ----------------------------------- | ----------------- |  |  | -------------------- | - |  | ----------------- | ----- | - |  |  | ---- | 
|                                                                                                          |                                                                                           | Successor         |  |                                     | Predecessor       | 
|                                                                                                          |                                                                                           |                   |  |                                     |                   | 
|                                                                                                          |                                                                                           | Year Ended        |  |                                     | Year Ended        |  |  | November 23, 2002 to |   |  | January 1         |      
|                                                                                                          |                                                                                           | December 31, 2004 |  |                                     | December 31, 2003 |  |  | December 31, 2002    |   |  | November 22, 2002 |      
|                                                                                                          |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |      
|                                                                                                          |                                                                                           |                   |  | ($ in thousands, except share data) |                   |  | 
|Net income (loss):                                                                                        |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |       |   |  |  |     
|                                                                                                          | As reported                                                                               |                   |  | (2.30                               | )                 |  |  | (13.58               | ) |  |                   | (4.00 | ) |  |  | 0.43 | 
|                                                                                                          | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |  | 0.01                                |                   |  |  | 0.04                 |   |  |                   |      |   |  |  |     | 
|                                                                                                          | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                   |  | (0.08                               | )                 |  |  | (0.30                | ) |  |                   |      |   |  |  |     | 
|                                                                                                          |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |      
|                                                                                                          | Pro forma                                                                                 |                   |  | (2.37                               | )                 |  |  | (13.84               | ) |  |                   | (4.00 | ) |  |  | 0.43 | 
|Net income (loss) attributable to common stock:                                                           |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |       |   |  |  |     
|                                                                                                          | As reported                                                                               |                   |  | (2.30                               | )                 |  |  | (16.83               | ) |  |                   | (4.64 | ) |  |  | 0.43 | 
|                                                                                                          | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |  | 0.01                                |                   |  |  | 0.04                 |   |  |                   |      |   |  |  |     | 
|                                                                                                          | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                   |  | (0.08                               | )                 |  |  | (0.30                | ) |  |                   |      |   |  |  |     | 
|                                                                                                          |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |      
|                                                                                                          | Pro forma                                                                                 |                   |  | (2.37                               | )                 |  |  | (17.09               | ) |  |                   | (4.64 | ) |  |  | 0.43 | 
|Income (loss) from continuing operations attributable to common
    stock before discontinued operations: |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |       |   |  |  |     
|                                                                                                          | As reported                                                                               |                   |  | (2.59                               | )                 |  |  | (14.86               | ) |  |                   | (3.54 | ) |  |  | 0.60 | 
|                                                                                                          | Add: Stock-based compensation expense included in net income,
    net of tax effects      |                   |  | 0.01                                |                   |  |  | 0.04                 |   |  |                   |      |   |  |  |     | 
|                                                                                                          | Deduct: Total pro forma stock-based employee compensation
    expense, net of tax effects |                   |  | (0.08                               | )                 |  |  | (0.30                | ) |  |                   |      |   |  |  |     | 
|                                                                                                          |                                                                                           |                   |  |                                     |                   |  |  |                      |   |  |                   |      
|                                                                                                          | Pro forma                                                                                 |                   |  | (2.66                               | )                 |  |  | (15.12               | ) |  |                   | (3.54 | ) |  |  | 0.60 | 



Revenue Recognition




Foreign Currency
Translation




F-14



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Operating Segments




Use of Estimates




Self-insurance




Reorganization
Expenses




New Accounting
Pronouncements




F-15



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)














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



F-16



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








|                                             |  |                |         |     |      |  |                        |                |  |  |           | 
|-------------------------------------------- |  | -------------- | ------- | --- | ---- |  | ---------------------- | -------------- |  |  | --------- | 
|                                             |  | Issued under   |         |     |      |  | Available for issuance |               
|                                             |  | the Stock      |         |     |      |  | under the Stock        |               
|                                             |  | Incentive Plan |         |     | Type |  |                        | Incentive Plan | 
|                                             |  |                |         |     |      |  |                        |                | 
|Available under plan, less previously issued |  |                |         |     |      |  |                        |                |  |  | 2,726,380 | 
|Issued  April 9, 2004                       |  |                | 1,382   | (1) |      |  | restricted stock       |                |  |  | 2,724,998 | 
|Issued  June 25, 2004                       |  |                | 383,500 | (2) |      |  | stock option           |                |  |  | 2,341,498 | 
|Options forfeited in 2004                    |  |                | (14,378 | )   |      |  |                        |                |  |  | 2,355,876 | 
|                                             |  |                |         |     |      |  |                        |                | 
|                                             |  |                | 370,504 |     |      |  |                        |                |  |  |           | 
|                                             |  |                |         |     |      |  |                        |                | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On April 9, 2004, the Company issued to its CEO, Thomas
    Parrington, 1,382 restricted stock units in accordance with his
    employment agreement. The restricted stock units vest on
    April 9, 2005 when they will be convertible into an equal
    number of shares of common stock.                                                                                                                                                                                                                                                                                                     
|   
|(2) | On June 25, 2004, the Committee awarded stock options to
    acquire 383,500 shares of the Companys common stock
    to certain of the Companys employees and to members of the
    audit committee. Each of the three members of the audit
    committee received non-qualified options to acquire
    5,000 shares of the Companys common stock. The
    exercise price of the awards granted was $10.52, the average of
    the high and low market prices of the share on the day of the
    grant, and the shares vest in three equal annual installments
    beginning on June 25, 2005.





F-17



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                           |           |         |         |                  |                |   |       |       | 
|-------------------------- | --------- | ------- | ------- | ---------------- | -------------- | - | ----- | ----- | 
|                           |           |         |         | Weighted Average |               
|                           |           | Options |         |                  | Exercise Price |  
|                           |           |         |         |                  |                |  
|Balance, December 31, 2002 |           |         |        |                  |                |   |       |      
|                           | Granted   |         |         | 157,785          |                |   | $     | 13.92 | 
|                           | Exercised |         |         | (258             | )              |   |       | 15.21 | 
|                           | Forfeited |         |         |                 |                |   |       |      | 
|                           |           |         |         |                  |                |  
|Balance, December 31, 2003 |           |         | 157,527 |                  |                |   | 13.92 |      
|                           | Granted   |         |         | 383,500          |                |   |       | 10.52 | 
|                           | Exercised |         |         | (239             | )              |   |       | 15.21 | 
|                           | Forfeited |         |         | (14,378          | )              |   |       | 13.42 | 
|                           |           |         |         |                  |                |  
|Balance, December 31, 2004 |           |         | 526,410 |                  |                | $ | 11.46 |      
|                           |           |         |         |                  |                |  

|                           |                                  |            |        |         |     
|-------------------------- | -------------------------------- | ---------- | ------ | ------- | ----
|                           |                                  | Restricted |       
|                           |                                  | Stock      |       
|                           |                                  |            |       
|Balance, December 31, 2002 |                                  |            |       |        
|                           | Granted                          |            |        | 66,667  |     
|                           | Shares converted to common stock |            |        |        |     
|                           | Forfeited                        |            |        |        |     
|                           |                                  |            |       
|Balance, December 31, 2003 |                                  |            | 66,667 | (1)    
|                           | Granted                          |            |        | 1,382   |     
|                           | Shares converted to common stock |            |        | (22,222 | )(2)
|                           | Forfeited                        |            |        |        |     
|                           |                                  |            |       
|Balance, December 31, 2004 |                                  |            | 45,827 |        
|                           |                                  |            |       






|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(1) | At December 31, 2003, none of the restricted stock had
    vested.                           
|   
|(2) | During the year ended December 31, 2004, 22,222 units
    of the restricted stock had vested.



|                |                  |                     |        |                  |                     |            |                  |  |                 |  |  |                  |       |  |                 |  |        |  |  |   |       | 
|--------------- | ---------------- | ------------------- | ------ | ---------------- | ------------------- | ---------- | ---------------- |  | --------------- |  |  | ---------------- | ----- |  | --------------- |  | ------ |  |  | - | ----- | 
|                |                  | Options Outstanding |        |                  |                    
|                |                  |                     |        |                  | Options Exercisable |           
|                |                  |                     |        | Weighted Average |                     |            |                  |  |                 | 
|                |                  |                     |        | Remaining Life   |                     |            | Weighted Average |  |                 |  |  | Weighted Average |      
|Range of prices |                  |                     | Number |                  |                     | (in Years) |                  |  | Exercise Prices |  |  | Number           |       |  | Exercise Prices | 
|                |                  |                     |        |                  |                     |            |                  |  |                 |  |  |                  |       |  |                 | 
|                | $ 9.00 to $10.50 |                     |        |                  | 33,333              |            |                  |  | 8.5             |  |  | $                | 9.00  |  |                 |  | 11,111 |  |  | $ | 9.00  | 
|                | $10.51 to $15.00 |                     |        |                  | 378,000             |            |                  |  | 9.5             |  |  | $                | 10.52 |  |                 |  |       |  |  | $ | 10.52 | 
|                | $15.01 to $15.50 |                     |        |                  | 107,911             |            |                  |  | 8.7             |  |  | $                | 15.21 |  |                 |  | 71,921 |  |  | $ | 15.21 | 
|                | $15.51 to $16.00 |                     |        |                  | 7,166               |            |                  |  | 8.8             |  |  | $                | 15.66 |  |                 |  | 4,778  |  |  | $ | 15.66 | 
|                |                  |                     |        |                  |                     |            |                  |  |                 |  |  |                  |       |  |                 | 
|                |                  |                     |        |                  | 526,410             |            |                  |  | 9.2             |  |  | $                | 11.46 |  |                 |  | 87,810 |  |  | $ | 14.45 | 
|                |                  |                     |        |                  |                     |            |                  |  |                 |  |  |                  |       |  |                 | 



F-18



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|                        |  |                   |          |     |                   |  |          |                      |  |  |                   |  |  |  |   | 
|----------------------- |  | ----------------- | -------- | --- | ----------------- |  | -------- | -------------------- |  |  | ----------------- |  |  |  | - | 
|                        |  | Successor         |          |     | Predecessor       | 
|                        |  |                   |          |     |                   | 
|                        |  | Year Ended        |          |     | Year Ended        |  |          | November 23, 2002 to |  |  | January 1 to      | 
|                        |  | December 31, 2004 |          |     | December 31, 2003 |  |          | December 31, 2002    |  |  | November 22, 2002 | 
|                        |  |                   |          |     |                   |  |          |                      |  |  |                   | 
|                        |  |                   |          | (1) |                   |  | (1)      |                      |  | 
|Expected life of option |  |                   | 10 years |     |                   |  | 10 years |                      |  |  |                  |  |  |  |  | 
|Risk free interest rate |  |                   | 4.09     | %   |                   |  | 4.09     | %                    |  |  |                  |  |  |  |  | 
|Expected volatility     |  |                   | 55.74    | %   |                   |  | 55.75    | %                    |  |  |                  |  |  |  |  | 
|Expected dividend yield |  |                   |         |     |                   |  |         |                      |  |  |                  |  |  |  |  | 






|    |                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company filed for Chapter 11 on December 20, 2001.
    The fair value of the options was estimated to be nil while the
    Company was in Chapter 11. On its emergence from
    Chapter 11 on November 25, 2002 (November 22,
    2002 for accounting) all stock options were cancelled. No
    options were granted between January 1, 2002 and
    December 31, 2002.



|                                               |  |                   |           |  |                   |   |           |                      |  |  |                   |  |  |  |   | 
|---------------------------------------------- |  | ----------------- | --------- |  | ----------------- | - | --------- | -------------------- |  |  | ----------------- |  |  |  | - | 
|                                               |  | Successor         |           |  | Predecessor       |  
|                                               |  |                   |           |  |                   |  
|                                               |  | Year Ended        |           |  | Year Ended        |   |           | November 23, 2002 to |  |  | January 1 to      | 
|                                               |  | December 31, 2004 |           |  | December 31, 2003 |   |           | December 31, 2002    |  |  | November 22, 2002 | 
|                                               |  |                   |           |  |                   |   |           |                      |  |  |                   | 
|Weighted average fair value of options granted |  | $                 | 7.97      |  |                   | $ | 9.66      |                      |  |  |                  |  |  |  |  | 
|Total number of options granted                |  |                   | 526,907   |  |                   |   | 157,833   |                      |  |  |                  |  |  |  |  | 
|Total fair value of all options granted        |  | $                 | 4,199,408 |  |                   | $ | 1,524,367 |                      |  |  |                  |  |  |  |  | 



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







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



F-19



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








| |                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) an additional $0.1 million on the Holiday Inn
    Express Pensacola, FL to reflect the loss recorded on sale of
    this hotel in March 2004;                                                                                                                                                                 
|
| | b) an additional $0.5 million on the Downtown Plaza
    Hotel Cincinnati, OH to reflect the lowered estimated selling
    price of the hotel and the loss recorded on sale of the hotel in
    April 2004;                                                                                                       
|
| | c) an additional $0.4 million on the Holiday Inn
    Morgantown, WV as capital improvements were spent on this hotel
    for franchise compliance that did not add incremental value or
    revenue generating capacity to the property;                                                                         
|
| | d) an additional $0.7 million on the Holiday Inn
    Memphis, TN to reflect the reduced selling price and additional
    disposal costs upon sale of this hotel in December 2004;                                                                                                                                
|
| | e) an additional $1.0 million on the Holiday Inn
    Austin (South), TX to reflect a reduction in the estimated
    selling price due to feedback from potential buyers that this
    hotel had limited future franchise options due to its exterior
    corridors. This hotel remains for sale at March 1, 2005;
|
| | f) $1.7 million on the Holiday Inn Rolling Meadows, IL
    to record the difference between the estimated selling price and
    the carrying value of this hotel consistent with an offer
    received on the hotel. This hotel remains for sale at
    March 1, 2005;                                           
|
| | g) $0.4 million on the Holiday Inn Florence, KY
    primarily related to disposal costs incurred on sale of the
    hotel in December 2004; and                                                                                                                                                                  
|
| | h) additional adjustments on four other assets aggregating
    to a reduction of impairment charges of $0.1 million.                                                                                                                                                                                             

F-20



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) $1.1 million on the Holiday Inn Express Pensacola,
    FL as this hotel was identified for sale in the second quarter
    2003. The performance of this hotel was negatively impacted in
    2003 by the opening of three new hotels in its market and the
    conversion of another fully renovated hotel to the Holiday Inn
    Express brand in April 2003;                                                                                                                            
|
| | b) $1.0 million on the Downtown Plaza Hotel
    Cincinnati, OH as this hotel was listed for sale in the second
    quarter 2003. Operating profits decreased more than forecast at
    this hotel following the loss of its franchise affiliation in
    May 2003;                                                                                                                                                                                                                           
|
| | c) $0.8 million on the Holiday Inn Morgantown, WV as
    this hotel was identified for sale in the second quarter 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the fourth quarter of 2003 the
    expected selling price of this hotel was lowered as a result of
    the opening of a Radisson hotel in the market, which negatively
    impacted the operating results of this hotel;                                                
|
| | d) $0.6 million on the Holiday Inn Fort Mitchell,
    KY as this hotel was identified for sale in the second quarter
    2003 at which time, based on the anticipated selling price, no
    impairment was required. In the third quarter of 2003 it was
    determined with the broker that the selling price needed to be
    lowered to find a willing buyer, resulting in an impairment
    charge;                                                                                      
|
| | e) $0.6 million on the land parcel in Mt. Laurel, NJ
    as this property was identified for sale in the second quarter
    of 2003. During the sales process the broker recommended a price
    reduction which resulted in $0.6 million of impairment
    charges;                                                                                                                                                                                                                         
|
| | f) $0.6 million on the Holiday Inn Market Center
    Dallas, TX as this hotel was identified for sale in the second
    quarter 2003 at which time $0.6 million of impairment was
    recorded. The reduction in value was primarily related to the
    franchisors decision to not transfer the franchise
    agreement on this hotel to a new buyer. This hotel was sold in
    January 2004 for net proceeds of $2.5 million compared to
    its adjusted net book value of $2.4 million;
|
| | g) $0.3 million on the Holiday Inn Memphis, TN as this
    hotel was identified for sale in the second quarter of 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the third quarter of 2003 it was
    determined by the broker that it was advisable that the selling
    price should be lowered because the franchise agreement was not
    going to be renewed;                                                                       
|
| | h) $0.1 million on the Holiday Inn Austin (South), TX
    as this hotel was identified for sale in the second quarter of
    2003 at which time impairment was recorded based on a listing
    brokers evaluation of the hotel; and                                                                                                                                                                                                                                                         
|
| | i) $0.1 million on the land parcel in Fayetteville, NC
    as this property was identified for sale in the second quarter
    of 2003 at which time, based on the anticipated selling price,
    no impairment was required. In the third quarter 2003 the
    listing broker determined it was advisable to lower the asking
    price which resulted in an impairment charge.                                                                                                              

F-21



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|                                          |                                                   |                   |        |        |                   |   |        |        | 
|----------------------------------------- | ------------------------------------------------- | ----------------- | ------ | ------ | ----------------- | - | ------ | ------ | 
|                                          |                                                   | December 31, 2004 |        |        | December 31, 2003 |  
|                                          |                                                   |                   |        |        |                   |  
|                                          |                                                   | ($ in thousands)  |       
|ASSETS                                    |                                                   |                   |        |        |                   |   |        |       
|Accounts receivable, net of allowances    |                                                   | $                 | 510    |        |                   | $ | 1,252  |       
|Inventories                               |                                                   |                   | 660    |        |                   |   | 1,377  |       
|Prepaid expenses and other current assets |                                                   |                   | 483    |        |                   |   | 1,039  |       
|Property and equipment, net               |                                                   |                   | 28,207 |        |                   |   | 61,624 |       
|Other assets                              |                                                   |                   | 668    |        |                   |   | 3,275  |       
|                                          |                                                   |                   |        |        |                   |  
|                                          | Total assets held for sale                        |                   | $      | 30,528 |                   |   | $      | 68,567 | 
|                                          |                                                   |                   |        |        |                   |  
|                                         
|LIABILITIES                               |                                                   |                   |        |        |                   |   |        |       
|Accounts payable                          |                                                   | $                 | 1,328  |        |                   | $ | 1,234  |       
|Other accrued liabilities                 |                                                   |                   | 1,467  |        |                   |   | 3,120  |       
|Advance deposits                          |                                                   |                   | 147    |        |                   |   | 390    |       
|Current portion of long-term liabilities  |                                                   |                   | 363    |        |                   |   | 771    |       
|Long-term liabilities                     |                                                   |                   | 27,236 |        |                   |   | 52,433 |       
|                                          |                                                   |                   |        |        |                   |  
|                                          | Total liabilities related to assets held for sale |                   | $      | 30,541 |                   |   | $      | 57,948 | 
|                                          |                                                   |                   |        |        |                   |  

F-22



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |        |       |       |        |        |        |        | 
|------------------- | ---------------------------------------------------------- | ---------------------------------------------- | ------------------------ | -------------------- | ------------------ | ------ | ------------ | ----------------- | ------ | ------ | ------ | ------ | ----- | ----- | ------ | ------ | ------ | ------ | 
|                    |                                                            |                                                |                          | Predecessor          |                   
|                    |                                                            | Successor                                      |                          |                      |                    |       
|                    |                                                            |                                                |                          |                      | January 1, 2002 to |       
|                    |                                                            |                                                |                          | November 23, 2002 to |                    |        | November 22, |                  
|                    |                                                            | 2004                                           |                          |                      | 2003               |        |              | December 31, 2002 |        |        | 2002   |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    |                                                            |                                                |                          | ($ in thousands)     |                    |        |             
|Revenues:           |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |        |       |       |        |       
|                    | Rooms                                                      |                                                | $                        | 28,917               |                    |        | $            | 46,451            |        |        | $      | 4,311  |       |       | $      | 59,549 |       
|                    | Food and beverage                                          |                                                |                          | 8,002                |                    |        |              | 11,264            |        |        |        | 1,596  |       |       |        | 15,113 |       
|                    | Other                                                      |                                                |                          | 1,280                |                    |        |              | 3,422             |        |        |        | 534    |       |       |        | 4,095  |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    |                                                            |                                                | 38,199                   |                      |                    |        | 61,137       |                   |        |        | 6,441  |        |       |       | 78,757 |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|Operating expenses: |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |        |       |       |        |       
|                    | Direct:                                                    |                                                |                          |                      |                    |        |              |                   |        |        |        |        |       |       |        |        |       
|                    |                                                            | Rooms                                          |                          |                      | 9,269              |        |              |                   | 14,439 |        |        |        | 1,822 |       |        |        | 18,960 |       
|                    |                                                            | Food and beverage                              |                          |                      | 6,375              |        |              |                   | 8,905  |        |        |        | 1,409 |       |        |        | 12,107 |       
|                    |                                                            | Other                                          |                          |                      | 1,022              |        |              |                   | 2,483  |        |        |        | 280   |       |        |        | 2,795  |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    |                                                            |                                                | 16,666                   |                      |                    |        | 25,827       |                   |        |        | 3,511  |        |       |       | 33,862 |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    |                                                            |                                                | 21,533                   |                      |                    |        | 35,310       |                   |        |        | 2,930  |        |       |       | 44,895 |       
|                    | Other operating expenses:                                  |                                                |                          |                      |                    |        |              |                   |        |        |        |        |       |       |        |        |       
|                    |                                                            | Other hotel operating costs                    |                          |                      | 14,663             |        |              |                   | 22,525 |        |        |        | 3,140 |       |        |        | 28,327 |       
|                    |                                                            | Property and other taxes, insurance and leases |                          |                      | 2,401              |        |              |                   | 7,118  |        |        |        | 1,331 |       |        |        | 7,680  |       
|                    |                                                            | Depreciation and amortization                  |                          |                      | 240                |        |              |                   | 3,367  |        |        |        | 857   |       |        |        | 12,701 |       
|                    |                                                            | Impairment of long-lived assets                |                          |                      | 4,696              |        |              |                   | 5,387  |        |        |        |      |       |        |        |       |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    |                                                            |                                                | Other operating expenses |                      |                    | 22,000 |              |                   |        | 38,397 |        |        |       | 5,328 |        |        |        | 48,708 | 
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    |                                                            |                                                | (467                     | )                    |                    |        | (3,087       | )                 |        |        | (2,398 | )      |       |       | (3,813 | )     
|                    | Interest income                                            |                                                |                          | 50                   |                    |        |              |                  |        |        |        |        |       |       |        |        |       
|                    | Interest expense and other financing costs                 |                                                |                          | (4,739               | )                  |        |              | (3,953            | )      |        |        | (183   | )     |       |        | (3,672 | )     
|                    | Gain on asset dispositions                                 |                                                |                          | 9,168                |                    |        |              | 3,085             |        |        |        |       |       |       |        |       |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    | Income (loss) before income taxes and reorganization items |                                                |                          | 4,012                |                    |        |              | (3,955            | )      |        |        | (2,581 | )     |       |        | (7,485 | )     
|                    | Reorganization items                                       |                                                |                          |                     |                    |        |              | (648              | )      |        |        |       |       |       |        | 1,652  |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    | Income (loss) before income taxes                          |                                                |                          | 4,012                |                    |        |              | (4,603            | )      |        |        | (2,581 | )     |       |        | (5,833 | )     
|                    | Benefit (Provision) for income taxes                       |                                                |                          |                     |                    |        |              |                  |        |        |        |       |       |       |        | 1,200  |       
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       
|                    | Net income (loss)                                          |                                                | $                        | 4,012                |                    |        | $            | (4,603            | )      |        | $      | (2,581 | )     |       | $      | (4,633 | )     
|                    |                                                            |                                                |                          |                      |                    |        |              |                   |        |        |        |       



F-23



---



##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                                                 
|-- | ------------------------------------------------
|4. | Bankruptcy Proceedings and Fresh Start Reporting











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 5,000,000 shares of Preferred Stock, par value $0.01,
    initial liquidation value $25 per share, were issued or
    reserved for issuance in satisfaction of outstanding debt and
    other obligations;                                                                                                                                                                                                                             
|
| |  | 7,000,000 shares of common stock, par value $0.01 per
    share, were issued or reserved for issuance in satisfaction of
    outstanding debt and other obligations;                                                                                                                                                                                                                                                                   
|
| |  | Class A warrants to purchase an aggregate of
    1,510,638 shares of common stock at $18.29 per share
    were made available for issuance in satisfaction of outstanding
    debt and other obligations;                                                                                                                                                                                                                              
|
| |  | Class B warrants to purchase an aggregate of
    1,029,366 shares of common stock at $25.44 per share
    were made available for issuance in satisfaction of outstanding
    debt and other obligations;                                                                                                                                                                                                                              
|
| |  | Previous equity, consisting of an aggregate of
    28,479,837 shares, was cancelled, and in exchange the
    stockholders received their pro rata share of
    207,900 shares of common stock, plus class A warrants
    to purchase an aggregate of 251,823 shares of common stock
    and class B warrants to purchase an aggregate of
    778,304 shares of common stock;                                                           
|
| |  | The CRESTS were cancelled and the holders of the CRESTS received
    their pro rata share of 868,000 shares of the common stock,
    plus class A warrants to
    purchase 1,258,815 shares of common stock and
    class B warrants to purchase 251,062 shares of
    common stock;                                                                                                                                                   
|
| |  | The 12.25% Senior Subordinated 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, referred to as the
    disputed claims reserve. Until distributed, these
    shares form part of the disputed claims reserve for the
    pre-bankruptcy petition general unsecured creditors. These
    shares are periodically distributed as the disputed claims are
    resolved;
|
| |  | The Company closed on $302.7 million of exit financing
    arrangements with Merrill Lynch Mortgage Lending, Inc.
    (Merrill Lynch Mortgage) which was used to repay
    previous debt obligations, fund                                                                                                                                                                                                                           

F-24



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | payments of certain allowed claims and fund portions of certain
    required cash escrows. This financing was secured by 56 of its
    hotels;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | The Company closed on a $6.3 million exit financing
    arrangement with Computershare Trust Company of Canada,
    secured by one of its 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;
    and in the case of certain loans, a new interest rate; and                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | In accordance with SOP 90-7, 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 were recorded based on fair values with
    no retained earnings or accumulated losses carried forward as of
    November 22, 2002. 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).













| |                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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; and                                                                                                                                             
|
| | 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.                             

F-25



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








|                                      |                                           |                                   |                           |        |                |        |      |             |               |           |   |             |                   |   |          |         |        |        |         |         |        |        | 
|------------------------------------- | ----------------------------------------- | --------------------------------- | ------------------------- | ------ | -------------- | ------ | ---- | ----------- | ------------- | --------- | - | ----------- | ----------------- | - | -------- | ------- | ------ | ------ | ------- | ------- | ------ | ------ | 
|                                      |                                           |                                   |                           |        |                |        |      |             |               | Successor |  
|                                      |                                           | Predecessor                       |                           |        |                |        |      |             |               |           |   |            
|                                      |                                           |                                   |                           |        |                |        |      |             | Fresh Start & |           |   | Reorganized |                  
|                                      |                                           | Before Fresh Start                |                           |        | Extinguishment |        |      | Exchange of |               | Exit      |   |             | Balance Sheet     |  
|                                      |                                           | November 22, 2002                 |                           |        | of Debt        |        |      | Stock       |               | 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 |       

F-26



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                        |                                      |                                      |         |          |                |   |          |             |               |           |           |             |          |                   |          |          |          |   |         |        |        | 
|------------------------------------------------------- | ------------------------------------ | ------------------------------------ | ------- | -------- | -------------- | - | -------- | ----------- | ------------- | --------- | --------- | ----------- | -------- | ----------------- | -------- | -------- | -------- | - | ------- | ------ | ------ | 
|                                                        |                                      |                                      |         |          |                |   |          |             |               | Successor |          
|                                                        |                                      | Predecessor                          |         |          |                |   |          |             |               |           |           |            
|                                                        |                                      |                                      |         |          |                |   |          |             | Fresh Start & |           |           | Reorganized |         
|                                                        |                                      | Before Fresh Start                   |         |          | Extinguishment |   |          | Exchange of |               |           | Exit      |             |          | Balance Sheet     |         
|                                                        |                                      | November 22, 2002                    |         |          | of Debt        |   |          | Stock       |               |           | Financing |             |          | November 22, 2002 |         
|                                                        |                                      |                                      |         |          |                |   |          |             |               |           |           |             |          |                   |         
|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   |       
|Commitments and contingencies                           |                                      |                                      |         |          |                |   |          |             |               |           |           |             |          |                   |          |          |          |   |         |       
|Mandatory 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 |       
|                                                        |                                      |                                      |         |          |                |   |          |             |               |           |           |             |          |                   |         






|                       |  |                |         | 
|---------------------- |  | -------------- | ------- | 
|                       |  | (In thousands) |        
|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:                                                                          

|                                                                                                      |  |                |          |  
|----------------------------------------------------------------------------------------------------- |  | -------------- | -------- | -
|                                                                                                      |  | (In thousands) |         
|Liabilities subject to compromise (pre-emergence)                                                     |  | $              | 926,987  |  
|Liabilities settled and to be settled in cash and shares                                              |  |                | (490,103 | )
|Reinstated debt                                                                                       |  |                | (86,038  | )
|Remaining liabilities subject to compromise (for subsidiaries in
    Chapter 11 at December 31, 2002) |  |                | (94,416  | )
|                                                                                                      |  |                |         
|                                                                                                      |  | $              | 256,430  |  
|                                                                                                      |  |                |         

F-27



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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                                                                                                                                                                                                                                                              



|                                                                          |  |                |         | 
|------------------------------------------------------------------------- |  | -------------- | ------- | 
|                                                                          |  | (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 | 
|                                                                          |  |                |        



|   |                    
|-- | -------------------
|5. | Accounts Receivable



|                                |  |                   |       |   |                   |   |       |  
|------------------------------- |  | ----------------- | ----- | - | ----------------- | - | ----- | -
|                                |  | December 31, 2004 |       |   | December 31, 2003 |  
|                                |  |                   |       |   |                   |  
|                                |  | ($ in thousands)  |      
|Trade accounts receivable       |  | $                 | 7,664 |   |                   | $ | 8,287 |  
|Allowance for doubtful accounts |  |                   | (684  | ) |                   |   | (689  | )
|Other receivables               |  |                   | 987   |   |                   |   | 571   |  
|                                |  |                   |       |   |                   |  
|                                |  | $                 | 7,967 |   |                   | $ | 8,169 |  
|                                |  |                   |       |   |                   |  



|   |                                          
|-- | -----------------------------------------
|6. | Prepaid Expenses and Other Current Assets



|                                    |  |                   |        |  |                   |   |        | 
|----------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | 
|                                    |  | December 31, 2004 |        |  | December 31, 2003 |  
|                                    |  |                   |        |  |                   |  
|                                    |  | ($ in thousands)  |       
|Deposit for property taxes          |  | $                 | 5,745  |  |                   | $ | 4,862  | 
|Prepaid insurance                   |  |                   | 3,730  |  |                   |   | 5,718  | 
|Lender-required insurance deposits  |  |                   | 3,560  |  |                   |   | 2,774  | 
|Deposits and other prepaid expenses |  |                   | 4,197  |  |                   |   | 3,714  | 
|                                    |  |                   |        |  |                   |  
|                                    |  | $                 | 17,232 |  |                   | $ | 17,068 | 
|                                    |  |                   |        |  |                   |  

F-28



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                       
|-- | ----------------------
|7. | Property and Equipment



|                              |  |         |       |                  |              |   |         |              |  |   |         |  
|----------------------------- |  | ------- | ----- | ---------------- | ------------ | - | ------- | ------------ |  | - | ------- | -
|                              |  | Useful  |       |                  |              |   |        
|                              |  | Lives   |       |                  | December 31, |   |         | December 31, | 
|                              |  | (Years) |       |                  | 2004         |   |         | 2003         | 
|                              |  |         |       |                  |              |   |         |              | 
|                              |  |         |       | ($ in thousands) |             
|Land                          |  |         |      |                  |              | $ | 77,554  |              |  | $ | 76,624  |  
|Buildings and improvements    |  |         | 10-40 |                  |              |   | 449,081 |              |  |   | 437,418 |  
|Furnishings and equipment     |  |         | 3-10  |                  |              |   | 81,359  |              |  |   | 58,817  |  
|                              |  |         |       |                  |              |   |         |              | 
|                              |  |         |       |                  |              |   | 607,994 |              |  |   | 572,859 |  
|Less accumulated depreciation |  |         |       |                  |              |   | (56,667 | )            |  |   | (31,860 | )
|Construction in progress      |  |         |       |                  |              |   | 18,044  |              |  |   | 22,819  |  
|                              |  |         |       |                  |              |   |         |              | 
|                              |  |         |       |                  |              | $ | 569,371 |              |  | $ | 563,818 |  
|                              |  |         |       |                  |              |   |         |              | 









| |                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) an additional $0.1 million on the Holiday Inn
    Express Pensacola, FL to reflect the loss recorded on sale of
    this hotel in March 2004;                                                                                                                                                                 
|
| | b) an additional $0.5 million on the downtown Plaza
    Hotel Cincinnati, OH to reflect the lowered estimated selling
    price of the hotel and the loss recorded on sale of the hotel in
    April 2004;                                                                                                       
|
| | c) an additional $0.4 million on the Holiday Inn
    Morgantown, WV as capital improvements were spent on this hotel
    for franchise compliance that did not add incremental value or
    revenue generating capacity to the property;                                                                         
|
| | d) an additional $0.7 million on the Holiday Inn
    Memphis, TN to reflect the reduced selling price and additional
    disposal costs upon sale of this hotel in December 2004;                                                                                                                                
|
| | e) an additional $1.0 million on the Holiday Inn
    Austin (South), TX to reflect a reduction in the estimated
    selling price due to feedback from potential buyers that this
    hotel had limited future franchise options due to its exterior
    corridors. This hotel remains for sale at March 1, 2005;

F-29



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | f) $1.7 million on the Holiday Inn Rolling Meadows, IL
    to record the difference between the estimated selling price and
    the carrying value of this hotel consistent with an offer
    received on the hotel. This hotel remains for sale at
    March 1, 2005;
|
| | g) $0.4 million on the Holiday Inn Florence, KY
    primarily related to disposal costs incurred on sale of the
    hotel in December 2004; and                                                                                                                       
|
| | h) additional adjustments on four other assets aggregating
    to a reduction of impairment charges of $0.1 million.                                                                                                                                                  





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) $1.1 million on the Holiday Inn Express Pensacola,
    FL as this hotel was identified for sale in the second quarter
    2003. The performance of this hotel was negatively impacted in
    2003 by the opening of three new hotels in its market and the
    conversion of another fully renovated hotel to the Holiday Inn
    Express brand in April 2003;                                                                                                                            
|
| | b) $1.0 million on the Downtown Plaza Hotel
    Cincinnati, OH as this hotel was listed for sale in the second
    quarter 2003. Operating profits decreased more than forecast at
    this hotel following the loss of its franchise affiliation in
    May 2003;                                                                                                                                                                                                                           
|
| | c) $0.8 million on the Holiday Inn Morgantown, WV as
    this hotel was identified for sale in the second quarter 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the fourth quarter of 2003 the
    expected selling price of this hotel was lowered as a result of
    the opening of a Radisson hotel in the market, which negatively
    impacted the operating results of this hotel;                                                
|
| | d) $0.6 million on the Holiday Inn Fort Mitchell,
    KY as this hotel was identified for sale in the second quarter
    2003 at which time, based on the anticipated selling price, no
    impairment was required. In the third quarter of 2003 it was
    determined with the broker that the selling price needed to be
    lowered to find a willing buyer, resulting in an impairment
    charge;                                                                                      
|
| | e) $0.6 million on the land parcel in Mt. Laurel, NJ
    as this property was identified for sale in the second quarter
    of 2003. During the sales process the broker recommended a price
    reduction which resulted in $0.6 million of impairment
    charges;                                                                                                                                                                                                                         
|
| | f) $0.6 million on the Holiday Inn Market Center
    Dallas, TX as this hotel was identified for sale in the second
    quarter 2003 at which time $0.6 million of impairment was
    recorded. The reduction in value was primarily related to the
    franchisors decision to not transfer the franchise
    agreement on this hotel to a new buyer. This hotel was sold in
    January 2004 for net proceeds of $2.5 million compared to
    its adjusted net book value of $2.4 million;
|
| | g) $0.3 million on the Holiday Inn Memphis, TN as this
    hotel was identified for sale in the second quarter of 2003 at
    which time, based on the anticipated selling price, no
    impairment was required. In the third quarter of 2003 it was
    determined by the broker that it was advisable that the selling
    price should be lowered because the franchise agreement was not
    going to be renewed;                                                                       

F-30



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | h) $0.1 million on the Holiday Inn Austin (South), TX
    as this hotel was identified for sale in the second quarter of
    2003 at which time impairment was recorded based on a listing
    brokers evaluation of the hotel; and                                                                                                                                           
|
| | i) $0.1 million on the land parcel in Fayetteville, NC
    as this property was identified for sale in the second quarter
    of 2003 at which time, based on the anticipated selling price,
    no impairment was required. In the third quarter 2003 the
    listing broker determined it was advisable to lower the asking
    price which resulted in an impairment charge.









| |    |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $1.1 million on the Holiday Inn Express Gadsden, AL as this
    hotel was identified for sale in January 2005 and the estimated
    selling price of the hotel was less than the assets
    carrying value. The estimated selling price of this hotel was
    negatively impacted by its franchise agreement expiring in
    August 2005 and the franchisor indicating that it will not renew
    the agreement;
|
| | b) | $3.7 million on the Holiday Inn Brunswick, GA as this hotel lost
    the business of a significant military group and the hotel is
    undergoing a required franchise conversion which is expected to
    result in reduced operating profits;                                                                                                                                                                  
|
| | c) | $0.6 million on the Quality Inn Hotel & Conference
    Center Metairie, LA as capital improvements were spent on health
    and safety items that added no incremental market value or
    revenue generating capacity at this hotel, resulting in the
    recording of impairment to bring the assets carrying value
    in line with the fair value;                                                          
|
| | d) | $0.9 million on the Holiday Inn St. Louis, MO as this
    hotel was identified for sale in January 2005 and the estimated
    selling price was less than the assets previously adjusted
    carrying value; and                                                                                                                                                                                                
|
| | e) | $0.6 million on the Holiday Inn Lawrence, KS as the financial
    performance of this hotel continues to decline as it is in need
    of a major renovation which is not economically justifiable as
    management has been notified the franchise agreement will not be
    renewed.                                                                                                                           





| |    |                                                                                                                                                                                                                                                         
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | $4.5 million on the Crown Plaza Macon, GA as the expected
    holding period for this hotel was reduced to six months because
    the Company was unable to locate a lender to refinance the
    maturing mortgage on this hotel as a single asset loan;

F-31



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | $2.5 million on the Holiday Inn St. Louis North, MO because
    the nearby airport renovations drastically changed the ingress
    and egress of this hotel thereby significantly lowering the
    financial performance of this hotel;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | c) | $1.8 million on the Quality Hotel & Conference Center
    Metairie, LA because of a significant decline in this
    hotels group room business because this hotel is in need
    of a major renovation, which the company had previously planned
    but subsequently discarded due to an inadequate expected return
    on investment. Transient business has also declined, resulting
    in reduced operating profits which led to the recording of
    impairment;                                                                                                                                                                                                                                                              
|
| | d) | $1.5 million on the Crowne Plaza Cedar Rapids, IA as the
    primary revenue source at this hotel has historically been group
    room revenues which have declined considerably in the past two
    years due to the poor condition of a city-owned ballroom
    attached to this hotel; and                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | e) | $1.3 million on the Holiday Inn Winter Haven, FL as this
    hotel had been identified for sale in the second quarter of 2003
    and the estimated sales price, less costs to sell, was below the
    hotels carrying value. The estimated sales price of the
    hotel was negatively impacted by the unanticipated closure of a
    nearby tourist attraction and the unexpected announcement that a
    major baseball team was going to relocate their spring training
    facilities away from this property. In the fourth quarter of
    2003, the Company ceased its selling efforts with respect to
    this hotel because the allocated loan amount on this hotel
    significantly exceeded the fair value of the hotel.





|   |             
|-- | ------------
|8. | Other Assets



|                           |  |                   |       |  |                   |   |        | 
|-------------------------- |  | ----------------- | ----- |  | ----------------- | - | ------ | 
|                           |  | December 31, 2004 |       |  | December 31, 2003 |  
|                           |  |                   |       |  |                   |  
|                           |  | ($ in thousands)  |      
|Deferred financing costs   |  | $                 | 4,250 |  |                   | $ | 9,207  | 
|Deferred franchise fees    |  |                   | 2,469 |  |                   |   | 2,358  | 
|Utility and other deposits |  |                   | 1,056 |  |                   |   | 615    | 
|                           |  |                   |       |  |                   |  
|                           |  | $                 | 7,775 |  |                   | $ | 12,180 | 
|                           |  |                   |       |  |                   |  





|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |       |            |  |   |     |  |  |   |       | 
|------------------------ |  | ---------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | ---- | - | ----- | ---------- |  | - | --- |  |  | - | ----- | 
|                         |  | Total            |       |  | 2005 |   |       | 2006 |  |   | 2007  |  |  | 2008 |       |  | 2009 |   |       | After 2009 | 
|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |       |            | 
|                         |  | ($ in thousands) |      
|Deferred financing costs |  | $                | 4,250 |  |      | $ | 1,009 |      |  | $ | 1,066 |  |  | $    | 946   |  |      | $ | 813   |            |  | $ | 416 |  |  | $ |      | 
|Deferred franchise fees  |  |                  | 2,469 |  |      |   | 449   |      |  |   | 362   |  |  |      | 287   |  |      |   | 193   |            |  |   | 163 |  |  |   | 1,015 | 
|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |       |            | 
|                         |  | $                | 6,719 |  |      | $ | 1,458 |      |  | $ | 1,428 |  |  | $    | 1,233 |  |      | $ | 1,006 |            |  | $ | 579 |  |  | $ | 1,015 | 
|                         |  |                  |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |       |            | 

F-32



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                          
|-- | -------------------------
|9. | Other Accrued Liabilities



|                                           |  |                   |        |  |                   |   |        | 
|------------------------------------------ |  | ----------------- | ------ |  | ----------------- | - | ------ | 
|                                           |  | December 31, 2004 |        |  | December 31, 2003 |  
|                                           |  |                   |        |  |                   |  
|                                           |  | ($ in thousands)  |       
|Salaries and related costs                 |  | $                 | 17,111 |  |                   | $ | 16,211 | 
|Property and sales taxes                   |  |                   | 7,089  |  |                   |   | 9,427  | 
|Professional fees                          |  |                   | 1,056  |  |                   |   | 570    | 
|Accrued state income taxes                 |  |                   | 207    |  |                   |   | 2,361  | 
|Franchise fee accrual                      |  |                   | 1,050  |  |                   |   | 1,115  | 
|Accrued interest                           |  |                   | 2,035  |  |                   |   | 526    | 
|Advances received against insurance claims |  |                   | 2,000  |  |                   |   |       | 
|Accrual for allowed claims                 |  |                   | 2,152  |  |                   |   | 186    | 
|Other                                      |  |                   | 775    |  |                   |   | 1,036  | 
|                                           |  |                   |        |  |                   |  
|                                           |  | $                 | 33,475 |  |                   | $ | 31,432 | 
|                                           |  |                   |        |  |                   |  



|    |                      
|--- | ---------------------
|10. | Long-Term Liabilities



|                                                                        |                          |                  |         |        |              |   |         |        | 
|----------------------------------------------------------------------- | ------------------------ | ---------------- | ------- | ------ | ------------ | - | ------- | ------ | 
|                                                                        |                          | December 31,     |         |        | December 31, |  
|                                                                        |                          | 2004             |         |        | 2003         |  
|                                                                        |                          |                  |         |        |              |  
|                                                                        |                          | ($ in thousands) |        
|Exit financing:                                                         |                          |                  |         |        |              |   |         |       
|Merrill Lynch Mortgage Lending, Inc.  Floating                         |                          | $                |        |        |              | $ | 299,333 |       
|Lehman financing:                                                       |                          |                  |         |        |              |   |         |       
|Lehman Brothers Holdings, Inc.                                          |                          |                  |        |        |              |   | 76,449  |       
|Refinancing Debt:                                                       |                          |                  |         |        |              |   |         |       
|Merrill Lynch Mortgage Lending, Inc.  Floating                         |                          |                  | 102,617 |        |              |   |        |       
|Merrill Lynch Mortgage Lending, Inc.  Fixed                            |                          |                  | 258,410 |        |              |   |        |       
|                                                                        |                          |                  |         |        |              |  
|Merrill Lynch Mortgage Lending, Inc.  Total                            |                          |                  | 361,027 |        |              |   |        |       
|Computer Share Trust Company of Canada                                  |                          |                  | 7,843   |        |              |   | 7,521   |       
|Other Financings:                                                       |                          |                  |         |        |              |   |         |       
|Column Financial, Inc.                                                  |                          |                  | 25,058  |        |              |   | 27,300  |       
|Lehman Brothers Holdings, Inc.                                          |                          |                  | 22,927  |        |              |   | 23,409  |       
|JP Morgan Chase Bank, Trustee                                           |                          |                  | 10,110  |        |              |   | 10,644  |       
|DDL Kinser                                                              |                          |                  | 2,286   |        |              |   | 2,385   |       
|First Union Bank                                                        |                          |                  |        |        |              |   | 3,359   |       
|Column Financial, Inc.                                                  |                          |                  | 8,545   |        |              |   | 8,943   |       
|Column Financial, Inc.                                                  |                          |                  | 3,069   |        |              |   | 3,206   |       
|Robb Evans, Trustee                                                     |                          |                  |        |        |              |   | 6,982   |       
|Tax notes issued pursuant to Lodgians Joint Plan of
    Reorganization |                          |                  | 3,302   |        |              |   | 1,957   |       
|                                                                        |                          |                  |         |        |              |  
|                                                                        | Total  Other Financings |                  |         | 75,297 |              |   |         | 88,185 | 
|                                                                        |                          |                  |         |        |              |  

F-33



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                      |                                           |                  |         |       |              |   |         |       | 
|----------------------------------------------------- | ----------------------------------------- | ---------------- | ------- | ----- | ------------ | - | ------- | ----- | 
|                                                      |                                           | December 31,     |         |       | December 31, |  
|                                                      |                                           | 2004             |         |       | 2003         |  
|                                                      |                                           |                  |         |       |              |  
|                                                      |                                           | ($ in thousands) |        
|Long-term liabilities  other:                        |                                           |                  |         |       |              |   |         |      
|                                                      | Deferred interest  long-term             |                  |         |      |              |   |         | 4,337 | 
|                                                      | Deferred rent on a long-term ground lease |                  |         |      |              |   |         | 2,506 | 
|                                                      | Other long-term liabilities               |                  |         | 1,865 |              |   |         | 551   | 
|                                                      |                                           |                  |         |       |              |  
|                                                      |                                           |                  | 1,865   |       |              |   | 7,394   |      
|                                                      |                                           |                  |         |       |              |  
|                                                      |                                           |                  | 446,032 |       |              |   | 478,882 |      
|Long-term liabilities related to assets held for sale |                                           |                  | (27,599 | )     |              |   | (53,204 | )    
|                                                      |                                           |                  |         |       |              |  
|                                                      |                                           | $                | 418,433 |       |              | $ | 425,678 |      
|                                                      |                                           |                  |         |       |              |  
|Less: Current portion of long-term liabilities        |                                           |                  | (25,290 | )     |              |   | (16,563 | )    
|                                                      |                                           |                  |         |       |              |  
|Total long-term liabilities  continuing operations   |                                           | $                | 393,143 |       |              | $ | 409,115 |      
|                                                      |                                           |                  |         |       |              |  

Exit Financing






| |   |                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Senior debt of $224.0 million from Merrill Lynch Mortgage,
    accruing interest at the rate of LIBOR plus 2.24%, secured by,
    among other things, first mortgage liens on the fee simple or
    leasehold interests in 55 of the Companys hotels;                                                                                     
|
| |  | Mezzanine debt of $78.7 million from Merrill Lynch
    Mortgage, accruing interest at the rate of LIBOR plus 9.00%,
    secured by the equity interest in the subsidiaries owning 56
    hotels (the 55 which secure the senior debt and one additional
    hotel); and                                                                    
|
| |  | Debt provided through Computershare Trust Company of
    Canada, a Canadian lender, of $10.0 million Canadian
    dollars (equated to approximately $6.3 million
    U.S. dollars at inception) maturing in December 2007,
    accruing interest at the rate of 7.88% secured by a mortgage on
    the property located in Windsor, Canada.





F-34



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Lehman Financing








Refinancing Debt
















F-35



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | multiple franchise agreement defaults and the continuance
    thereof beyond all notice and grace periods for hotels whose
    allocated loan amounts total 10% or more of the outstanding
    principal amount of such Refinancing Debt;

F-36



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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







Other Financings






F-37



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








Working Capital/ Related
Party Loan








F-38



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Loan/ Franchise
Agreements








| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Five of these hotels are held for sale;                                                                                                                                                                                                                                                         
|
| |  | Seven of the remaining hotels either just completed a major
    renovation, are undergoing a major renovation or a major
    renovation is planned, and the total cost of the renovations is
    projected to be $22.8 million of which $7.6 million
    has been spent;                        
|
| |  | One of the remaining hotels has a franchise agreement that
    expires in 2005 and is expected to be renovated upon selection
    of a new franchise. The total cost of the renovation will not be
    known until the franchisor inspects the property;                                        
|
| |  | Four of the remaining hotels are expected to be in full
    compliance with their franchise agreements during the next
    testing period;                                                                                                                                                      
|
| |  | Two of the remaining hotels are above the required franchise
    thresholds and must remain above those levels until February
    2006 to receive a clean slate letter;                                                                                                                       
|
| |  | One of the remaining hotels has implemented plans to improve
    service levels to return to compliance levels; and                                                                                                                                                                             
|
| |  | One hotel, which is 60% owned by the company, will undergo a
    major renovation after we complete the buyout of our minority
    partner in the second quarter of 2005. The renovation is
    expected to be completed in the first quarter of 2006 and is
    estimated to cost $4.3 million.



Interest Rate Cap
Agreements




F-39



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








Collateral for Loans




|                                                |  |                  |    |                     |  |                |         |                |  |   |         |  |  |  |                                   | 
|----------------------------------------------- |  | ---------------- | -- | ------------------- |  | -------------- | ------- | -------------- |  | - | ------- |  |  |  | --------------------------------- | 
|                                                |  |                  |    | December 31, 2004   |  |               
|                                                |  |                  |    |                     |  |               
|                                                |  | Number           |    | Property, Plant and |  | Debt           |         |               
|                                                |  | of Hotels        |    | Equipment, Net(1)   |  | Obligations(1) |         | Interest Rates
|                                                |  |                  |    |                     |  |                |         |               
|                                                |  | ($ in thousands) |    |                    
|Refinancing debt                                |  |                  |    |                     |  |                |         |                |  |   |         |  |  |  |                                   | 
|Merrill Lynch Mortgage Lending, Inc.  Floating |  |                  | 26 |                     |  | $              | 114,925 |                |  | $ | 102,617 |  |  |  | LIBOR plus 3.40%                  | 
|Merrill Lynch Mortgage Lending, Inc.  Fixed    |  |                  | 35 |                     |  |                | 315,317 |                |  |   | 258,410 |  |  |  | 6.58%                             | 
|                                                |  |                  |    |                     |  |                |         |                |  |   |         |  |  |  |                                   | 
|Merrill Lynch Mortgage Lending, Inc.  Total    |  |                  | 61 |                     |  |                | 430,242 |                |  |   | 361,027 |  |  |  |                                   | 
|Computershare Trust Company of Canada           |  |                  | 1  |                     |  |                | 15,907  |                |  |   | 7,843   |  |  |  | 7.88%                             | 
|Other financing                                 |  |                  |    |                     |  |                |         |                |  |   |         |  |  |  |                                   | 
|Column Financial, Inc.                          |  |                  | 9  |                     |  |                | 65,704  |                |  |   | 25,058  |  |  |  | 10.59%                            | 
|Lehman Brothers Holdings, Inc.                  |  |                  | 5  |                     |  |                | 37,131  |                |  |   | 22,927  |  |  |  | $16,154 at 9.40%; $6,773 at 8.90% | 
|JP Morgan Chase Bank, Trustee                   |  |                  | 2  |                     |  |                | 7,884   |                |  |   | 10,110  |  |  |  | 8.00%                             | 
|DDL Kinser                                      |  |                  | 1  |                     |  |                | 3,123   |                |  |   | 2,286   |  |  |  | 8.25%                             | 
|Column Financial, Inc.                          |  |                  | 1  |                     |  |                | 11,544  |                |  |   | 8,545   |  |  |  | 9.45%                             | 
|Column Financial, Inc.                          |  |                  | 1  |                     |  |                | 5,984   |                |  |   | 3,069   |  |  |  | 10.74%                            | 
|                                                |  |                  |    |                     |  |                |         |                |  |   |         |  |  |  |                                   | 
|Total  other financing                         |  |                  | 19 |                     |  |                | 131,370 |                |  |   | 71,995  |  |  |  |                                   | 
|                                                |  |                  |    |                     |  |                |         |                |  |   |         |  |  |  |                                   | 
|                                                |  |                  | 81 |                     |  |                | 577,519 |                |  |   | 440,865 |  |  |  | 6.91%(2)                          | 

F-40



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                              |  |                  |    |                   |                     |   |         |                |  |   |                |   |  |  |  | 
|------------------------------------------------------------- |  | ---------------- | -- | ----------------- | ------------------- | - | ------- | -------------- |  | - | -------------- | - |  |  |  | 
|                                                              |  |                  |    | December 31, 2004 |                     |   |        
|                                                              |  |                  |    |                   |                     |   |        
|                                                              |  | Number           |    |                   | Property, Plant and |   |         | Debt           |  |   |               
|                                                              |  | of Hotels        |    |                   | Equipment, Net(1)   |   |         | Obligations(1) |  |   | Interest Rates |  
|                                                              |  |                  |    |                   |                     |   |         |                |  |   |                |  
|                                                              |  | ($ in thousands) |    |                   |                    
|Long-term debt  other                                        |  |                  |    |                   |                     |   |         |                |  |   |                |   |  |  |  | 
|Tax notes issued pursuant to our Joint Plan of Reorganization |  |                  |   |                   |                     |   |        |                |  |   | 3,302          |   |  |  |  | 
|Other                                                         |  |                  |   |                   |                     |   |        |                |  |   | 1,865          |   |  |  |  | 
|                                                              |  |                  |    |                   |                     |   |         |                |  |   |                |  
|                                                              |  |                  |   |                   |                     |   |        |                |  |   | 5,167          |   |  |  |  | 
|Property, plant and equipment  unencumbered                  |  |                  | 4  |                   |                     |   | 20,059  |                |  |   |               |   |  |  |  | 
|                                                              |  |                  |    |                   |                     |   |         |                |  |   |                |  
|                                                              |  |                  | 85 |                   |                     |   | 597,578 |                |  |   | 446,032        |   |  |  |  | 
|Held for sale(2)                                              |  |                  | (7 | )                 |                     |   | (28,207 | )              |  |   | (27,599        | ) |  |  |  | 
|                                                              |  |                  |    |                   |                     |   |         |                |  |   |                |  
|Total December 31, 2004(3)                                    |  |                  | 78 |                   |                     | $ | 569,371 |                |  | $ | 418,433        |   |  |  |  | 
|                                                              |  |                  |    |                   |                     |   |         |                |  |   |                |  






|    |                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Debt obligations and property, plant and equipment of one hotel
    in which we have a non-controlling equity interest that we do
    not consolidate are excluded from the table above.
|   
|(2) | The 6.91% in the table above represents our annual weighted
    average cost of debt at December 31, 2004, using a LIBOR of
    2.4% as of December 31, 2004.                           
|   
|(3) | Debt obligations at December 31, 2004 include the current
    portion.                                                                                                                  



Future Loan Repayment
Projections




|                                                |  |                   |         |            |      |   |       |      |  |   |         |  |  |      |       |  |      |   |       |      |  |   |         |  |  |   |   | 
|----------------------------------------------- |  | ----------------- | ------- | ---------- | ---- | - | ----- | ---- |  | - | ------- |  |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ------- |  |  | - | - | 
|                                                |  |                   |         | Maturities
|                                                |  |                   |         |           
|                                                |  | Debt Obligations  |         |            |      |   | After
|                                                |  | December 31, 2004 |         |            | 2005 |   |       | 2006 |  |   | 2007    |  |  | 2008 |       |  | 2009 |   |       | 2009
|                                                |  |                   |         |            |      |   |       |      |  |   |         |  |  |      |       |  |      |   |       |     
|                                                |  | ($ in thousands) 
|Refinancing debt:                               |  |                   |         |            |      |   |       |      |  |   |         |  |  |      |       |  |      |   |       |      |  |   |         |  |  |   |   | 
|Merrill Lynch Mortgage Lending, Inc.  Floating |  | $                 | 102,617 |            |      | $ | 1,261 |      |  | $ | 101,356 |  |  | $    |      |  |      | $ |      |      |  | $ |        |  |  | $ |  | 
|Merrill Lynch Mortgage Lending, Inc.  Fixed    |  |                   | 258,410 |            |      |   | 4,110 |      |  |   | 4,392   |  |  |      | 4,695 |  |      |   | 4,970 |      |  |   | 240,243 |  |  |   |  | 
|                                                |  |                   |         |            |      |   |       |      |  |   |         |  |  |      |       |  |      |   |       |      | 
|Merrill Lynch Mortgage Lending, Inc.  Total    |  |                   | 361,027 |            |      |   | 5,371 |      |  |   | 105,748 |  |  |      | 4,695 |  |      |   | 4,970 |      |  |   | 240,243 |  |  |   |  | 
|Computer Share Trust Company of Canada          |  |                   | 7,843   |            |      |   | 258   |      |  |   | 279     |  |  |      | 7,306 |  |      |   |      |      |  |   |        |  |  |   |  | 

F-41



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                              |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      |  |  |         |  |  |  |        | 
|------------------------------------------------------------- |  | ----------------- | ------- | ---------- | ---- |  | ------ | ---- |  |  | ------- |  |  | ---- | ------ |  | ---- |  | ----- | ---- |  |  | ------- |  |  |  | ------ | 
|                                                              |  |                   |         | Maturities |     
|                                                              |  |                   |         |            |     
|                                                              |  | Debt Obligations  |         |            |      |  | After  |     
|                                                              |  | December 31, 2004 |         |            | 2005 |  |        | 2006 |  |  | 2007    |  |  | 2008 |        |  | 2009 |  |       | 2009 | 
|                                                              |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      | 
|                                                              |  | ($ in thousands)  |        
|Other financings:                                             |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      |  |  |         |  |  |  |        | 
|Column Financial, Inc.                                        |  |                   | 25,058  |            |      |  | 2,491  |      |  |  | 2,768   |  |  |      | 3,076  |  |      |  | 3,418 |      |  |  | 4,133   |  |  |  | 9,172  | 
|Lehman Brothers Holdings, Inc.                                |  |                   | 22,927  |            |      |  | 529    |      |  |  | 580     |  |  |      | 21,818 |  |      |  |      |      |  |  |        |  |  |  |       | 
|JP Morgan Chase Bank, Trustee                                 |  |                   | 10,110  |            |      |  | 10,110 |      |  |  |        |  |  |      |       |  |      |  |      |      |  |  |        |  |  |  |       | 
|DDL Kinser                                                    |  |                   | 2,286   |            |      |  | 2,286  |      |  |  |        |  |  |      |       |  |      |  |      |      |  |  |        |  |  |  |       | 
|Column Financial, Inc.                                        |  |                   | 8,545   |            |      |  | 437    |      |  |  | 480     |  |  |      | 528    |  |      |  | 580   |      |  |  | 693     |  |  |  | 5,827  | 
|Column Financial, Inc.                                        |  |                   | 3,069   |            |      |  | 3,069  |      |  |  |        |  |  |      |       |  |      |  |      |      |  |  |        |  |  |  |       | 
|                                                              |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      | 
|Total  Other Financings                                      |  |                   | 71,995  |            |      |  | 18,922 |      |  |  | 3,828   |  |  |      | 25,422 |  |      |  | 3,998 |      |  |  | 4,826   |  |  |  | 14,999 | 
|Other long-term liabilities:                                  |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      |  |  |         |  |  |  |        | 
|Tax notes issued pursuant to our Joint Plan of Reorganization |  |                   | 3,302   |            |      |  | 858    |      |  |  | 834     |  |  |      | 849    |  |      |  | 730   |      |  |  | 31      |  |  |  |       | 
|Other long-term liabilities                                   |  |                   | 1,865   |            |      |  | 244    |      |  |  | 159     |  |  |      | 540    |  |      |  | 153   |      |  |  | 145     |  |  |  | 624    | 
|                                                              |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      | 
|Total debt obligations                                        |  |                   | 446,032 |            |      |  | 25,653 |      |  |  | 110,848 |  |  |      | 38,812 |  |      |  | 9,851 |      |  |  | 245,245 |  |  |  | 15,623 | 
|                                                              |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      | 
|Less: Debt obligations  discontinued                         |  |                   | (27,599 | )          |      |  | (363   | )    |  |  |         |  |  |      |        |  |      |  |       |      |  |  |         |  |  |  |        | 
|                                                              |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      | 
|Total Debt obligations  continued                            |  | $                 | 418,433 |            |      |  | 25,290 |      |  |  |         |  |  |      |        |  |      |  |       |      |  |  |         |  |  |  |        | 
|                                                              |  |                   |         |            |      |  |        |      |  |  |         |  |  |      |        |  |      |  |       |      | 

11.     12.25% Cumulative Preferred
Shares Subject to Mandatory Redemption








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LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|    |                     
|--- | --------------------
|12. | Stockholders Equity

2002 Joint Plan of
Reorganization






| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | Common stock, 2,333,333 shares (adjusted for the 1:3
    reverse stock split), par value $0.01.
|
| |  | Class A and B warrants.                                                                        







2004 Reverse Stock
Split






2004 Public Equity
Offering






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LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Treasury Stock






|    |             
|--- | ------------
|13. | Income Taxes



|                              |  |                  |     |  |          |   |       |  |  |         |     |  |          |   |       |  |  |   |   |  |  |   |     | 
|----------------------------- |  | ---------------- | --- |  | -------- | - | ----- |  |  | ------- | --- |  | -------- | - | ----- |  |  | - | - |  |  | - | --- | 
|                              |  | Successor        |    
|                              |  |                  |    
|                              |  | 2004             |     |  | 2003     |  
|                              |  |                  |     |  |          |  
|                              |  | Current          |     |  | Deferred |   | Total |  |  | Current |     |  | Deferred |   | Total | 
|                              |  |                  |     |  |          |   |       |  |  |         |     |  |          |   |       | 
|                              |  | ($ in thousands) |    
|Federal                       |  | $                |    |  |          | $ |      |  |  | $       |    |  |          | $ |      |  |  | $ |  |  |  | $ |    | 
|State and local               |  |                  | 62  |  |          |   |      |  |  |         | 62  |  |          |   | 178   |  |  |   |  |  |  |   | 178 | 
|Foreign                       |  |                  | 166 |  |          |   |       |  |  |         | 166 |  |          |   |       |  |  |   |   |  |  |   |     | 
|                              |  |                  |     |  |          |   |       |  |  |         |     |  |          |   |       |  |  |  
|                              |  |                  | 228 |  |          |   |      |  |  |         | 228 |  |          |   | 178   |  |  |   |  |  |  |   | 178 | 
|Less: Discontinued operations |  |                  |    |  |          |   |      |  |  |         |    |  |          |   |      |  |  |   |  |  |  |   |    | 
|                              |  |                  |     |  |          |   |       |  |  |         |     |  |          |   |       |  |  |  
|                              |  | $                | 228 |  |          | $ |      |  |  | $       | 228 |  |          | $ | 178   |  |  | $ |  |  |  | $ | 178 | 
|                              |  |                  |     |  |          |   |       |  |  |         |     |  |          |   |       |  |  |  

|                              |  |                                        |    |  |          |                                      |    |       |                  |   |    |         |  |  |          |        |       |  |   |   |  |  |   |        |  
|----------------------------- |  | -------------------------------------- | -- |  | -------- | ------------------------------------ | -- | ----- | ---------------- | - | -- | ------- |  |  | -------- | ------ | ----- |  | - | - |  |  | - | ------ | -
|                              |  | Successor                              |    |  |          | Predecessor                          |   
|                              |  |                                        |    |  |          |                                      |   
|                              |  | November 23, 2002 to December 31, 2002 |    |  |          | January 1, 2002 to November 22, 2002 |   
|                              |  |                                        |    |  |          |                                      |   
|                              |  | Current                                |    |  | Deferred |                                      |    | Total |                  |   |    | Current |  |  | Deferred |        | Total | 
|                              |  |                                        |    |  |          |                                      |    |       |                  |   |    |         |  |  |          |        |       | 
|                              |  |                                        |    |  |          |                                      |    |       | ($ in thousands) |  
|Federal                       |  | $                                      |   |  |          | $                                    |   |       |                  | $ |   |         |  |  | $        | (430   | )     |  | $ |  |  |  | $ | (430   | )
|State and local               |  |                                        | 32 |  |          |                                      | 32 |       |                  |   | 32 |         |  |  |          | (930   | )     |  |   |  |  |  |   | (930   | )
|Foreign                       |  |                                        |    |  |          |                                      |    |       |                  |   |    |         |  |  |          |       |       |  |   |   |  |  |   |       |  
|                              |  |                                        |    |  |          |                                      |    |       |                  |   |    |         |  |  |          |        |       |  |  
|                              |  |                                        | 32 |  |          |                                      |   |       |                  |   | 32 |         |  |  |          | (1,360 | )     |  |   |  |  |  |   | (1,360 | )
|Less: Discontinued operations |  |                                        |   |  |          |                                      |   |       |                  |   |   |         |  |  |          | 1,200  |       |  |   |  |  |  |   | 1,200  |  
|                              |  |                                        |    |  |          |                                      |    |       |                  |   |    |         |  |  |          |        |       |  |  
|                              |  | $                                      | 32 |  |          | $                                    |   |       |                  | $ | 32 |         |  |  | $        | (160   | )     |  | $ |  |  |  | $ | (160   | )
|                              |  |                                        |    |  |          |                                      |    |       |                  |   |    |         |  |  |          |        |       |  |  

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LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                         |                          |                  |         |          |         |   |       |             |   |   |         |          |   |         |         |          |             |   |       |        |   |   |         |          |  
|---------------------------------------- | ------------------------ | ---------------- | ------- | -------- | ------- | - | ----- | ----------- | - | - | ------- | -------- | - | ------- | ------- | -------- | ----------- | - | ----- | ------ | - | - | ------- | -------- | -
|                                         |                          | 2004             |         |          | 2003    |  
|                                         |                          |                  |         |          |         |  
|                                         |                          | Total            |         |          | Current |   |       | Non-current |   |   | Total   |          |   | Current |         |          | Non-current |  
|                                         |                          |                  |         |          |         |   |       |             |   |   |         |          |   |         |         |          |             |  
|                                         |                          | ($ in thousands) |        
|Property and equipment                   |                          | $                | 4,951   |          |         | $ |      |             |   | $ | 4,951   |          |   | $       | 21,807  |          |             | $ |      |        |   | $ | 21,807  |         
|Net operating loss carry forwards        |                          |                  | 127,547 |          |         |   |       |             |   |   | 127,547 |          |   |         | 104,911 |          |             |   |       |        |   |   | 104,911 |         
|Loan costs                               |                          |                  | 782     |          |         |   |       |             |   |   | 782     |          |   |         | 1,224   |          |             |   |       |        |   |   | 1,224   |         
|Legal and workers compensation reserves |                          |                  | 3,609   |          |         |   | 3,609 |             |   |   |        |          |   |         | 2,896   |          |             |   | 2,896 |        |   |   |         |         
|AMT and FICA credit carry forwards       |                          |                  | 2,341   |          |         |   |       |             |   |   | 2,341   |          |   |         | 2,342   |          |             |   |       |        |   |   | 2,342   |         
|Other operating accruals                 |                          |                  | 937     |          |         |   | 937   |             |   |   |        |          |   |         | 1,506   |          |             |   | 1,506 |        |   |   |        |         
|Other                                    |                          |                  | 4,988   |          |         |   |       |             |   |   | 4,988   |          |   |         | 5,316   |          |             |   |       |        |   |   | 5,316   |         
|                                         |                          |                  |         |          |         |   |       |             |   |   |         |          |   |         |         |          |             |  
|                                         | Total                    |                  |         | 145,155  |         |   |       | 4,546       |   |   |         | 140,609  |   |         |         | 140,002  |             |   |       | 4,402  |   |   |         | 135,600  |  
|                                         | Less valuation allowance |                  |         | (145,155 | )       |   |       | (4,546      | ) |   |         | (140,609 | ) |         |         | (140,002 | )           |   |       | (4,402 | ) |   |         | (135,600 | )
|                                         |                          |                  |         |          |         |   |       |             |   |   |         |          |   |         |         |          |             |  
|                                         |                          | $                |        |          |         | $ |      |             |   | $ |        |          |   | $       |        |          |             | $ |      |        |   | $ |        |         
|                                         |                          |                  |         |          |         |   |       |             |   |   |         |          |   |         |         |          |             |  



|                                                              |  |           |         |                  |             |   |              |                   |  |   |                   |   |  |   |         |  
|------------------------------------------------------------- |  | --------- | ------- | ---------------- | ----------- | - | ------------ | ----------------- |  | - | ----------------- | - |  | - | ------- | -
|                                                              |  | Successor |         |                  | Predecessor |  
|                                                              |  |           |         |                  |             |  
|                                                              |  |           |         | November 23 to   |             |   | January 1 to |                  
|                                                              |  | 2004      |         |                  | 2003        |   |              | December 31, 2002 |  |   | November 22, 2002 |  
|                                                              |  |           |         |                  |             |   |              |                   |  |   |                   |  
|                                                              |  |           |         | ($ in thousands) |             |   |             
|Federal income tax (benefit) charge at statutory federal rate |  | $         | (10,746 | )                |             | $ | (13,292      | )                 |  | $ | (3,160            | ) |  | $ | 3,742   |  
|State income tax, net                                         |  |           | (1,517  | )                |             |   | (1,876       | )                 |  |   | (732              | ) |  |   | (12,929 | )
|Effect of cancellation of debt                                |  |           |        |                  |             |   |             |                   |  |   |                  |   |  |   | (40,848 | )
|Non-deductible items                                          |  |           | 7,338   |                  |             |   | 2,968        |                   |  |   | (74               | ) |  |   | (1,932  | )
|Change in valuation allowance                                 |  |           | 5,153   |                  |             |   | 12,378       |                   |  |   | 3,998             |   |  |   | 50,607  |  
|                                                              |  |           |         |                  |             |   |              |                   |  |   |                   |  
|                                                              |  |           | 228     |                  |             |   | 178          |                   |  |   | 32                |   |  |   | (1,360  | )
|Less discontinued operations                                  |  |           |        |                  |             |   |             |                   |  |   |                  |   |  |   | 1,200   |  
|                                                              |  |           |         |                  |             |   |              |                   |  |   |                   |  
|Provision (benefit) for income taxes                          |  | $         | 228     |                  |             | $ | 178          |                   |  | $ | 32                |   |  | $ | (160    | )
|                                                              |  |           |         |                  |             |   |              |                   |  |   |                   |  





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LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|    |                           
|--- | --------------------------
|14. | Related Party Transactions

Preferred Share
Exchange




Refinancing Debt




Consultancy






Related Party
Receivable




Revolving Loan




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LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                   
|--- | ------------------
|15. | Earnings Per Share



|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |         |   |  |   |        |  
|---------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---- | - | ------------------------------- | ---- | -------------------- | - | ----------------- | ------------------ |  | ----------------- | ------- | - |  | - | ------ | -
|                                         |                                                                                                          |      |   |                                 |      | November 23, 2002 to |   |                   | January 1, 2002 to | 
|                                         |                                                                                                          | 2004 |   |                                 | 2003 |                      |   | December 31, 2002 |                    |  | November 22, 2002 |        
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         |                                                                                                          |      |   | (In thousands, except per share |      |                      |  
|                                         |                                                                                                          |      |   | data)                           |      |                      |  
|Basic and diluted loss per share:        |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |         |   |  |   |       
|Numerator:                               |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |         |   |  |   |       
|                                         | Income (loss) from continuing operations                                                                 |      | $ | (35,846                         | )    |                      | $ | (27,074           | )                  |  | $                 | (6,745  | ) |  | $ | 16,999 |  
|                                         | Income (loss) from discontinued operations                                                               |      |   | 4,012                           |      |                      |   | (4,603            | )                  |  |                   | (2,581  | ) |  |   | (4,633 | )
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         | Net (loss) income                                                                                        |      |   | (31,834                         | )    |                      |   | (31,677           | )                  |  |                   | (9,326  | ) |  |   | 12,366 |  
|                                         | Preferred stock dividend                                                                                 |      |   |                                |      |                      |   | (7,594            | )                  |  |                   | (1,510  | ) |  |   |       |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         | Net loss (income) attributable to common stock                                                           |      |   | (31,834                         | )    |                      |   | (39,271           | )                  |  |                   | (10,836 | ) |  |   | 12,366 |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         | Income (loss) from continuing operations                                                                 |      |   | (35,846                         | )    |                      |   | (27,074           | )                  |  |                   | (6,745  | ) |  |   | 16,999 |  
|                                         | Preferred stock dividend                                                                                 |      |   |                                |      |                      |   | (7,594            | )                  |  |                   | (1,510  | ) |  |   |       |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         | Income (loss) from continuing operations attributable to common
    stock before discontinued operations |      | $ | (35,846                         | )    |                      | $ | (34,668           | )                  |  | $                 | (8,255  | ) |  | $ | 16,999 |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|Denominator:                             |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |         |   |  |   |       
|                                         | Denominator for basic and diluted loss per share 
    weighted-average shares                           |      |   | 13,817                          |      |                      |   | 2,333             |                    |  |                   | 2,333   |   |  |   | 28,480 |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|Basic and diluted loss per common share: |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |         |   |  |   |       
|                                         | (Loss) income from continuing operations                                                                 |      | $ | (2.59                           | )    |                      | $ | (11.60            | )                  |  | $                 | (2.89   | ) |  | $ | 0.60   |  
|                                         | Income (loss) from discontinued operations                                                               |      |   | 0.29                            |      |                      |   | (1.98             | )                  |  |                   | (1.11   | ) |  |   | (0.17  | )
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         | Net (loss) income                                                                                        |      |   | (2.30                           | )    |                      |   | (13.58            | )                  |  |                   | (4.00   | ) |  |   | 0.43   |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         | Net (loss) income attributable to common stock                                                           |      |   | (2.30                           | )    |                      |   | (16.83            | )                  |  |                   | (4.64   | ) |  |   | 0.43   |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        
|                                         | (Loss) income from continuing operations attributable to common
    stock before discontinued operations |      | $ | (2.59                           | )    |                      | $ | (14.86            | )                  |  | $                 | (3.54   | ) |  | $ | 0.60   |  
|                                         |                                                                                                          |      |   |                                 |      |                      |   |                   |                    |  |                   |        





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LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|    |                              
|--- | -----------------------------
|16. | Commitments and Contingencies

Franchise Agreements and
Capital Expenditure




|                        |  |           |        |                      |             |   |                    |                   |  |   |                   |  |  |   |        | 
|----------------------- |  | --------- | ------ | -------------------- | ----------- | - | ------------------ | ----------------- |  | - | ----------------- |  |  | - | ------ | 
|                        |  | Successor |        |                      | Predecessor |  
|                        |  |           |        |                      |             |  
|                        |  |           |        | November 23, 2002 to |             |   | January 1, 2002 to |                  
|                        |  | 2004      |        |                      | 2003        |   |                    | December 31, 2002 |  |   | November 22, 2002 | 
|                        |  |           |        |                      |             |   |                    |                   |  |   |                   | 
|                        |  |           |        | ($ in thousands)     |             |   |                   
|Continuing operations   |  | $         | 21,951 |                      |             | $ | 20,569             |                   |  | $ | 1,598             |  |  | $ | 19,398 | 
|Discontinued operations |  |           | 2,410  |                      |             |   | 3,816              |                   |  |   | 377               |  |  |   | 4,926  | 
|                        |  |           |        |                      |             |   |                    |                   |  |   |                   | 
|                        |  | $         | 24,361 |                      |             | $ | 24,385             |                   |  | $ | 1,975             |  |  | $ | 24,324 | 
|                        |  |           |        |                      |             |   |                    |                   |  |   |                   | 





| |   |                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Five of these hotels are held for sale;                                                                                                                                                                                                                                 
|
| |  | Seven of the remaining hotels either just completed a major
    renovation, are undergoing a major renovation or a major
    renovation is planned, and the total cost of the renovations is
    projected to be $22.8 million of which $7.6 million
    has been spent;
|
| |  | One of the remaining hotels has a franchise agreement that
    expires in 2005 and is expected to be renovated upon selection
    of a new franchise. The total cost of the renovation will not be
    known until the franchisor inspects the property;                
|
| |  | Four of the remaining hotels are expected to be in full
    compliance with their franchise agreements during the next
    testing period;                                                                                                                              
|
| |  | Two of the remaining hotels are above the required franchise
    thresholds and must remain above those levels until February
    2006 to receive a clean slate letter;                                                                                               

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LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |   |                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | One of the remaining hotels has implemented plans to improve
    service levels to return to compliance levels; and                                                                                                                                                                                       
|
| |  | One hotel, which is 60% owned by the Company, will undergo a
    major renovation after the Company completes the buyout of its
    minority partner in the second quarter of 2005. The renovation
    is expected to be completed in the first quarter of 2006 and is
    estimated to cost $4.3 million.









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

F-49



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a franchise termination for any hotel currently subject to a
    franchise agreement that remains without a franchise agreement
    for more than six months.











Letters of Credit




Self-insurance




F-50



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




Casualty Losses








Litigation




Operating Leases




F-51



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                        |  |           |       |                      |             |   |                    |                   |  |   |                   |  |  |   |       | 
|----------------------- |  | --------- | ----- | -------------------- | ----------- | - | ------------------ | ----------------- |  | - | ----------------- |  |  | - | ----- | 
|                        |  | Successor |       |                      | Predecessor |  
|                        |  |           |       |                      |             |  
|                        |  |           |       | November 23, 2002 to |             |   | January 1, 2002 to |                  
|                        |  | 2004      |       |                      | 2003        |   |                    | December 31, 2002 |  |   | November 22, 2002 | 
|                        |  |           |       |                      |             |   |                    |                   |  |   |                   | 
|                        |  |           |       | ($ in thousands)     |             |   |                   
|Continuing operations   |  | $         | 2,347 |                      |             | $ | 4,002              |                   |  | $ | 378               |  |  | $ | 3,079 | 
|Discontinued operations |  |           | 294   |                      |             |   | 696                |                   |  |   | 124               |  |  |   | 618   | 
|                        |  |           |       |                      |             |   |                    |                   |  |   |                   | 
|                        |  | $         | 2,641 |                      |             | $ | 4,698              |                   |  | $ | 502               |  |  | $ | 3,697 | 
|                        |  |           |       |                      |             |   |                    |                   |  |   |                   | 



|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 3,181   | 
|2006       |  |   | 3,192   | 
|2007       |  |   | 3,225   | 
|2008       |  |   | 3,260   | 
|2009       |  |   | 3,295   | 
|Thereafter |  |   | 102,901 | 
|           |  |   |        
|           |  | $ | 119,054 | 
|           |  |   |        



|    |                          
|--- | -------------------------
|17. | Employee Retirement Plans



|                        |  |           |     |                      |             |   |                    |                   |  |   |                   |  |  |   |     | 
|----------------------- |  | --------- | --- | -------------------- | ----------- | - | ------------------ | ----------------- |  | - | ----------------- |  |  | - | --- | 
|                        |  | Successor |     |                      | Predecessor |  
|                        |  |           |     |                      |             |  
|                        |  |           |     | November 23, 2002 to |             |   | January 1, 2002 to |                  
|                        |  | 2004      |     |                      | 2003        |   |                    | December 31, 2002 |  |   | November 22, 2002 | 
|                        |  |           |     |                      |             |   |                    |                   |  |   |                   | 
|                        |  |           |     | ($ in thousands)     |             |   |                   
|Continuing operations   |  | $         | 203 |                      |             | $ | 260                |                   |  | $ | 27                |  |  | $ | 185 | 
|Discontinued operations |  |           |    |                      |             |   |                   |                   |  |   |                  |  |  |   |    | 
|                        |  |           |     |                      |             |   |                    |                   |  |   |                   | 
|                        |  | $         | 203 |                      |             | $ | 260                |                   |  | $ | 27                |  |  | $ | 185 | 
|                        |  |           |     |                      |             |   |                    |                   |  |   |                   | 



F-52



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                        |  |           |     |                      |             |   |                    |                   |  |   |                   |  |  |   |     | 
|----------------------- |  | --------- | --- | -------------------- | ----------- | - | ------------------ | ----------------- |  | - | ----------------- |  |  | - | --- | 
|                        |  | Successor |     |                      | Predecessor |  
|                        |  |           |     |                      |             |  
|                        |  |           |     | November 23, 2002 to |             |   | January 1, 2002 to |                  
|                        |  | 2004      |     |                      | 2003        |   |                    | December 31, 2002 |  |   | November 22, 2002 | 
|                        |  |           |     |                      |             |   |                    |                   |  |   |                   | 
|                        |  |           |     | ($ in thousands)     |             |   |                   
|Continuing operations   |  | $         | 689 |                      |             | $ | 601                |                   |  | $ | 45                |  |  | $ | 330 | 
|Discontinued operations |  |           | 47  |                      |             |   | 76                 |                   |  |   |                  |  |  |   |    | 
|                        |  |           |     |                      |             |   |                    |                   |  |   |                   | 
|                        |  | $         | 736 |                      |             | $ | 677                |                   |  | $ | 45                |  |  | $ | 330 | 
|                        |  |           |     |                      |             |   |                    |                   |  |   |                   | 



|    |                  
|--- | -----------------
|18. | Subsequent Events

Sale of Two Hotels




Additions to Held for Sale
Hotels




Manhattan and Lawrence
Debt




19.     Selected Quarterly Financial
Data, Unaudited




F-53



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |        |        |  
|---------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------- | ------- | ------ | ------- | - | ------ | ------- | ------ | - | ------- | ------ | ------- | ------- | ------ | ------ | ------- | - | ------- | ------- | ------ | - | ------- | ------ | ------ | - | ------ | ------ | ------ | - | ------- | ------ | ------ | -
|                                                                                   |                                                                | 2004                               |         |        | 2003    |  
|                                                                                   |                                                                |                                    |         |        |         |  
|                                                                                   |                                                                | Fourth                             |         |        | Third   |   |        | Second  |        |   | First   |        |         | Fourth  |        |        | Third   |   |         | Second  |        |   | First   |       
|                                                                                   |                                                                | Quarter                            |         |        | Quarter |   |        | Quarter |        |   | Quarter |        |         | Quarter |        |        | Quarter |   |         | Quarter |        |   | Quarter |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   |                                                                | ($ in thousands)                   |        
|Revenues:                                                                          |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |       
|                                                                                   | Rooms                                                          |                                    | $       | 52,253 |         |   | $      | 64,805  |        |   | $       | 64,325 |         |         | $      | 57,563 |         |   | $       | 52,089  |        |   | $       | 62,506 |        |   | $      | 61,010 |        |   | $       | 53,914 |       
|                                                                                   | Food and beverage                                              |                                    |         | 19,555 |         |   |        | 16,950  |        |   |         | 19,436 |         |         |        | 16,488 |         |   |         | 18,800  |        |   |         | 16,407 |        |   |        | 18,977 |        |   |         | 16,607 |       
|                                                                                   | Other                                                          |                                    |         | 2,358  |         |   |        | 2,806   |        |   |         | 2,816  |         |         |        | 2,754  |         |   |         | 2,567   |        |   |         | 2,841  |        |   |        | 2,838  |        |   |         | 2,858  |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   |                                                                |                                    | 74,166  |        |         |   | 84,561 |         |        |   | 86,577  |        |         |         | 76,805 |        |         |   | 73,456  |         |        |   | 81,754  |        |        |   | 82,825 |        |        |   | 73,379  |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Operating expenses:                                                                |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |       
|                                                                                   | Direct:                                                        |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |        |       
|                                                                                   |                                                                | Rooms                              |         |        | 16,355  |   |        |         | 18,722 |   |         |        | 16,960  |         |        |        | 16,018  |   |         |         | 16,023 |   |         |        | 17,697 |   |        |        | 16,730 |   |         |        | 15,363 |  
|                                                                                   |                                                                | Food and beverage                  |         |        | 14,225  |   |        |         | 12,595 |   |         |        | 12,713  |         |        |        | 11,534  |   |         |         | 12,557 |   |         |        | 12,030 |   |        |        | 12,365 |   |         |        | 11,734 |  
|                                                                                   |                                                                | Other                              |         |        | 1,885   |   |        |         | 2,095  |   |         |        | 2,077   |         |        |        | 1,972   |   |         |         | 2,178  |   |         |        | 2,013  |   |        |        | 1,842  |   |         |        | 1,938  |  
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   |                                                                |                                    | 32,465  |        |         |   | 33,412 |         |        |   | 31,750  |        |         |         | 29,524 |        |         |   | 30,758  |         |        |   | 31,740  |        |        |   | 30,937 |        |        |   | 29,036  |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   |                                                                |                                    | 41,701  |        |         |   | 51,149 |         |        |   | 54,827  |        |         |         | 47,281 |        |         |   | 42,698  |         |        |   | 50,014  |        |        |   | 51,888 |        |        |   | 44,343  |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Other operating expenses:                                                          |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |       
|                                                                                   | Other hotel operating costs                                    |                                    |         | 23,790 |         |   |        | 25,577  |        |   |         | 23,822 |         |         |        | 24,072 |         |   |         | 22,546  |        |   |         | 24,164 |        |   |        | 22,797 |        |   |         | 22,475 |       
|                                                                                   | Property and other taxes, insurance and leases                 |                                    |         | 5,160  |         |   |        | 5,597   |        |   |         | 5,376  |         |         |        | 5,751  |         |   |         | 5,343   |        |   |         | 6,087  |        |   |        | 6,923  |        |   |         | 6,661  |       
|                                                                                   | Corporate and other                                            |                                    |         | 3,548  |         |   |        | 4,519   |        |   |         | 4,782  |         |         |        | 4,413  |         |   |         | 4,612   |        |   |         | 4,235  |        |   |        | 6,075  |        |   |         | 5,970  |       
|                                                                                   | Casualty gains and losses                                      |                                    |         | 295    |         |   |        | 2,019   |        |   |         |       |         |         |        |       |         |   |         |        |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   | Depreciation and amortization                                  |                                    |         | 6,635  |         |   |        | 7,066   |        |   |         | 6,870  |         |         |        | 6,805  |         |   |         | 7,194   |        |   |         | 7,572  |        |   |        | 7,573  |        |   |         | 7,422  |       
|                                                                                   | Impairment of long-lived assets                                |                                    |         | 6,809  |         |   |        | 607     |        |   |         |       |         |         |        |       |         |   |         | 11,286  |        |   |         | 2      |        |   |        | 1,378  |        |   |         |       |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   | Other operating expenses                                       |                                    |         | 46,237 |         |   |        | 45,385  |        |   |         | 40,850 |         |         |        | 41,041 |         |   |         | 50,981  |        |   |         | 42,060 |        |   |        | 44,746 |        |   |         | 42,528 |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   |                                                                |                                    | (4,534  | )      |         |   | 5,764  |         |        |   | 13,977  |        |         |         | 6,240  |        |         |   | (8,283  | )       |        |   | 7,954   |        |        |   | 7,142  |        |        |   | 1,815   |       
|Other income (expenses):                                                           |                                                                |                                    |         |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   |        |         |        |   |        |        |        |   |       |        |        |   |        |       
|                                                                                   | Interest income and other                                      |                                    |         | 360    |         |   |        | 212     |        |   |         | 66     |         |         |        | 43     |         |   |         | 486     |        |   |         | 114    |        |   |        | 124    |        |   |         | 83     |       
|                                                                                   | Gain on asset dispositions                                     |                                    |         |       |         |   |        |        |        |   |         |       |         |         |        |       |         |   |         | 445     |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   | Interest expense and other financing costs:                    |                                    |         |       |         |   |        |        |        |   |         |       |         |         |        |       |         |   |         |        |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   |                                                                | Preferred stock dividend           |         |        |        |   |        |         | (865   | ) |         |        | (4,233  | )       |        |        | (4,285  | ) |         |         | (4,065 | ) |         |        | (4,027 | ) |        |        |       |   |         |        |        |  
|                                                                                   |                                                                | Other interest expense             |         |        | (7,561  | ) |        |         | (7,350 | ) |         |        | (19,920 | )       |        |        | (8,159  | ) |         |         | (7,718 | ) |         |        | (7,665 | ) |        |        | (6,919 | ) |         |        | (6,279 | )
|                                                                                   |                                                                | Loss on preferred stock redemption |         |        |        |   |        |         | (4,471 | ) |         |        | (1,592  | )       |        |        |        |   |         |         |       |   |         |        |       |   |        |        |       |   |         |        |       |  
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|(Loss) income before income taxes, reorganization items and
    minority interests |                                                                |                                    | (11,735 | )      |         |   | (6,710 | )       |        |   | (11,702 | )      |         |         | (6,161 | )      |         |   | (19,135 | )       |        |   | (3,624  | )      |        |   | 347    |        |        |   | (4,381  | )     
|Reorganization items                                                               |                                                                |                                    |        |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   | 647     |         |        |   |        |        |        |   | (808   | )      |        |   | (1,237  | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Loss before income taxes and minority interest                                     |                                                                |                                    | (11,735 | )      |         |   | (6,710 | )       |        |   | (11,702 | )      |         |         | (6,161 | )      |         |   | (18,488 | )       |        |   | (3,624  | )      |        |   | (461   | )      |        |   | (5,618  | )     
|(Provision) benefit for income taxes  continuing
    operations                   |                                                                |                                    | 259     |        |         |   | (337   | )       |        |   | (75     | )      |         |         | (76    | )      |         |   | 48      |         |        |   | (75     | )      |        |   | (75    | )      |        |   | (76     | )     
|Minority interests (net of taxes, nil)                                             |                                                                |                                    | 406     |        |         |   | 503    |         |        |   | (71     | )      |         |         | (147   | )      |         |   | 1,412   |         |        |   | 99      |        |        |   | (69    | )      |        |   | (149    | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Loss from continuing operations                                                    |                                                                |                                    | (11,070 | )      |         |   | (6,544 | )       |        |   | (11,848 | )      |         |         | (6,384 | )      |         |   | (17,028 | )       |        |   | (3,600  | )      |        |   | (605   | )      |        |   | (5,842  | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Discontinued operations:                                                           |                                                                |                                    |         |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   |         |         |        |   |         |        |        |   |        |        |        |   |         |       
|                                                                                   | (Loss) income from discontinued operations before income taxes |                                    |         | (2,694 | )       |   |        | 2,807   |        |   |         | 4,601  |         |         |        | (702   | )       |   |         | 522     |        |   |         | (46    | )      |   |        | (1,836 | )      |   |         | (3,243 | )     
|                                                                                   | Income tax benefit (provision)                                 |                                    |         |       |         |   |        |        |        |   |         |       |         |         |        |       |         |   |         |        |        |   |         |       |        |   |        |       |        |   |         |       |       
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|                                                                                   | (Loss) income from discontinued operations                     |                                    |         | (2,694 | )       |   |        | 2,807   |        |   |         | 4,601  |         |         |        | (702   | )       |   |         | 522     |        |   |         | (46    | )      |   |        | (1,836 | )      |   |         | (3,243 | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Net loss                                                                           |                                                                |                                    | (13,764 | )      |         |   | (3,737 | )       |        |   | (7,247  | )      |         |         | (7,086 | )      |         |   | (16,506 | )       |        |   | (3,646  | )      |        |   | (2,441 | )      |        |   | (9,085  | )     
|Preferred stock dividend                                                           |                                                                |                                    |        |        |         |   |       |         |        |   |        |        |         |         |       |        |         |   |        |         |        |   |        |        |        |   | (3,818 | )      |        |   | (3,776  | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       
|Net loss attributable to common stock                                              |                                                                | $                                  | (13,764 | )      |         | $ | (3,737 | )       |        | $ | (7,247  | )      |         | $       | (7,086 | )      |         | $ | (16,506 | )       |        | $ | (3,646  | )      |        | $ | (6,259 | )      |        | $ | (12,861 | )     
|                                                                                   |                                                                |                                    |         |        |         |   |        |         |        |   |         |        |         |         |        |        |         |   |         |         |        |   |         |       

F-54



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##### Table of Contents



INDEX TO EXHIBITS


|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.1     |  | Amended and Restated Certificate of Incorporation of Lodgian,
    Inc. (Incorporated by reference to Exhibit 3.1 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1 (File No. 333-113410), filed on June 4,
    2004).                                                                                                                                                                                                                                                                                                                                                                                
|3.2     |  | Amended and Restated Bylaws of Lodgian, Inc. (Incorporated by
    reference to Exhibit 3.4 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537), filed on March 9, 2004).                                                                                                                                                                                                                                                                                                                                                                                                             
|4.1     |  | Specimen Common Stock Certificate (Incorporated by reference to
    Exhibit 4.1 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1 (File
    No. 333-113410), filed on June 4, 2004).                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1.1  |  | Loan Agreement, dated as of January 31, 1995, by and among
    Column Financial, Inc., Servico Fort Wayne, Inc.,
    Washington Motel Enterprises, Inc., Servico Hotels I, Inc.,
    Servico Hotels II, Inc., Servico Hotels III, Inc.,
    Servico Hotels IV, Inc., New Orleans Airport Motels
    Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises,
    Inc., and Moon Airport Hotel, Inc. (Incorporated by reference to
    Exhibit 10.1.1 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                            
|10.1.2  |  | Promissory Note, in original amount of $60.5 million, dated
    as of January 31, 1995, by Servico Fort Wayne, Inc.,
    Washington Motel Enterprises, Inc., Servico Hotels I, Inc.,
    Servico Hotels II, Inc., Servico Hotels III, Inc.,
    Servico Hotels IV, Inc., New Orleans Airport Motels Associates,
    Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and
    Moon Airport Hotel, Inc., in favor of Column Financial, Inc.
    (Incorporated by reference to Exhibit 10.1.2 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).
|10.2    |  | Disclosure Statement for Joint Plan of Reorganization of
    Lodgian, Inc., et al(other than the CCA Debtors),
    Together with the Official Committee of Unsecured Creditors
    under Chapter 11 of the Bankruptcy Code, dated
    September 26, 2002 (Incorporated by reference to
    Exhibit 10.6 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                                                                                                                                                                                
|10.3    |  | First Amended Joint Plan of Reorganization of Lodgian, Inc.,
    et al(Other than CCA Debtors), Together with the
    Official Committee of Unsecured Creditors under Chapter 11
    of the Bankruptcy Code, dated September 26, 2002
    (Incorporated by reference to Exhibit 10.7 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                                                                                                                                               
|10.4    |  | Order Confirming First Amended Joint Plan of Reorganization of
    Lodgian, Inc., et alissued on November 5, 2002
    by the United States Bankruptcy Court for the Southern District
    of New York (Incorporated by reference to Exhibit 10.8 to
    the Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                                                                                                                                                                                   
|10.5    |  | Class A Warrant Agreement, dated as of November 25,
    2002, between Lodgian, Inc. and Wachovia Bank, N.A.
    (Incorporated by reference to Exhibit 10.9 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                                                                                                                                                                                                                                                                         
|10.6    |  | Class B Warrant Agreement, dated as of November 25,
    2002, between Lodgian, Inc. and Wachovia Bank, N.A.
    (Incorporated by reference to Exhibit 10.10 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                                                                                                                                                                                                                                                                        
|10.7    |  | Registration Rights Agreement, dated as of November 25,
    2002, between Lodgian, Inc. and the other signatories thereto
    (Incorporated by reference to Exhibit 10.11 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                                                                                                                                                                                                                                                          
|10.8    |  | Disclosure Statement for Joint Plan of Reorganization of Impac
    Hotels II, L.L.C. and Impac Hotels III, L.L.C.
    Together with the Official Committee of Unsecured Creditors
    Under Chapter 11 of the Bankruptcy Code (Incorporated by
    reference to Exhibit 10.13.1 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537), filed on March 9, 2004).                                                                                                                                                                                                                        



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.9    |  | Joint Plan of Reorganization of Impac Hotels II, L.L.C. and
    Impac Hotels III, L.L.C. Together with the Official Committee of
    Unsecured Creditors under Chapter 11 of the Bankruptcy Code
    (Incorporated by reference to Exhibit 10.13.2 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                 
|10.10   |  | Order Confirming Joint Plan of Reorganization of Impac
    Hotels II, L.L.C. and Impac Hotels III, L.L.C.
    Together with the Official Committee of Unsecured Creditors
    under Chapter 11 of the Bankruptcy Code (Incorporated by
    reference to Exhibit 10.13.3 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537), filed on March 9, 2004).
|10.11   |  | Post Confirmation Order and Notice for Joint Plan of
    Reorganization of Impac Hotels III, L.L.C. Together with
    the Official Committee of Unsecured Creditors under
    Chapter 11 of the Bankruptcy Code (Incorporated by
    reference to Exhibit 10.13.4 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537), filed on March 9, 2004).      
|10.12.1 |  | Lease Agreement, dated April 7, 1997, by and between
    CSB-Georgia Limited Partnership and Impac Hotel
    Group, L.L.C. (Incorporated by reference to
    Exhibit 10.14.1 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                                                                           
|10.12.2 |  | First Amendment to Lease Agreement, dated as of May 8,
    1998, by and between Cousins LORET Venture, L.L.C. and Impac
    Hotel Group, L.L.C. (Incorporated by reference to
    Exhibit 10.14.2 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                                                      
|10.12.3 |  | Second Amendment to Lease Agreement, dated as of June 7,
    2000, by and between Cousins LORET Venture, L.L.C. and Lodgian,
    Inc. (Incorporated by reference to Exhibit 10.14.3 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                
|10.12.4 |  | Third Amendment to Lease Agreement, dated as of April 1,
    2002, by and between Cousins LORET Venture, L.L.C. and Lodgian,
    Inc. (Incorporated by reference to Exhibit 10.14.4 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                                
|10.12.5 |  | Fourth Amendment to Lease Agreement, dated as of April 28,
    2003, by and between Cousins LORET Venture, L.L.C. and Lodgian,
    Inc. (Incorporated by reference to Exhibit 10.14.5 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File No. 1-14537), filed on
    March 9, 2004).                                                                              
|10.12.6 |  | Fifth Amendment to Lease Agreement, dated as of
    December 23, 2003, by and between Cousins LORET Venture,
    L.L.C. and Lodgian, Inc. (Incorporated by reference to
    Exhibit 10.14.6 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                                                            
|10.13.1 |  | Loan and Security Agreement (Floating Rate), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.1.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).                               
|10.13.2 |  | Promissory Note A in the original amount of $72,000,000.00,
    dated as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.1.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).           
|10.13.3 |  | Promissory Note B in the original amount of $38,000,000,
    dated as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.1.3
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).              
|10.13.4 |  | Guaranty of Recourse Obligations, dated as of June 25,
    2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.1.4
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                               



---



##### Table of Contents



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Number   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.13.5  |  | Conditional Assignment of Hotel Management Agreement, dated as
    of June 25, 2004, made by Lodgian Management Corp. and the
    Lodgian Entities listed on the signature pages thereto, to and
    for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.1.5 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).           
|10.13.6  |  | Conditional Assignment of Hotel Management Agreement (Beverage),
    dated as of June 25, 2004, made by Lodgian Management Corp.
    and the Lodgian Entities listed on the signature pages thereto,
    to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.1.6 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).
|10.13.7  |  | Assignment of Agreements, Licenses, Permits and Contracts, dated
    as of June 25, 2004, made by the Lodgian Entities listed on
    the signature pages thereto to Merrill Lynch Mortgage Lending,
    Inc. (Incorporated by reference to Exhibit 10.1.7 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                               
|10.13.8  |  | Cooperation Agreement, dated as of June 25, 2004, by and
    between the Mortgage Borrowers listed on the signature pages
    thereto, Lodgian Mezzanine Floating, LLC and Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to
    Exhibit 10.1.8 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                        
|10.13.9  |  | Collateral Assignment of Interest Rate Protection Agreement,
    dated as of June 25, 2004, made by the Lodgian Entities
    listed on the signature pages thereto in favor of Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to
    Exhibit 10.1.9 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                    
|10.13.10 |  | Cash Management Agreement, dated as of June 25, 2004, among
    the Lodgian Entities listed on the signature pages thereto,
    Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National
    Association and Lodgian Management Corp. (Incorporated by
    reference to Exhibit 10.1.10 to the Companys
    Quarterly Report for the period ended June 30, 2004 (File
    No. 1-14537), filed on August 16, 2004).                                
|10.13.11 |  | Environmental Indemnity, dated as of June 25, 2004, by the
    Lodgian Entities listed on the signature pages thereto and
    Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.1.11 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                          
|10.14.1  |  | Loan and Security Agreement (Fixed Rate #1), dated as of
    June 25, 2004, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.2.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                               
|10.14.2  |  | Promissory Note in the original amount of $63,801,000.00, dated
    as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.2.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                   
|10.14.3  |  | Guaranty of Recourse Obligations, dated as of June 25,
    2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.2.3
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                     
|10.14.4  |  | Cross-Guaranty, dated as of June 25, 2004, from the parties
    listed as Guarantors on the signature pages thereto to Merrill
    Lynch Mortgage Lending, Inc. (Incorporated by reference to
    Exhibit 10.2.4 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                                                                            
|10.14.5  |  | Conditional Assignment of Hotel Management Agreement, dated as
    of June 25, 2004, made by Lodgian Management Corp. and the
    Lodgian Entities listed on the signature pages thereto, to and
    for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.2.5 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).           



---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.14.6 |  | Assignment of Agreements, Licenses, Permits and Contracts, dated
    as of June 25, 2004, made by the Lodgian Entities listed on
    the signature pages thereto to Merrill Lynch Mortgage Lending,
    Inc. (Incorporated by reference to Exhibit 10.2.6 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                               
|10.14.7 |  | Cooperation Agreement, dated as of June 25, 2004, by and
    between the Mortgage Borrowers listed on the signature pages
    thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.2.7
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                           
|10.14.8 |  | Cash Management Agreement, dated as of June 25, 2004, among
    the Lodgian Entities listed on the signature pages thereto,
    Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National
    Association and Lodgian Management Corp. (Incorporated by
    reference to Exhibit 10.2.8 to the Companys Quarterly
    Report for the period ended June 30, 2004 (File
    No. 1-14537), filed on August 16, 2004).                                 
|10.14.9 |  | Environmental Indemnity, dated as of June 25, 2004, by the
    Lodgian Entities listed on the signature pages thereto and
    Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.2.9 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                           
|10.15.1 |  | Loan and Security Agreement (Fixed Rate #2), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.3.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).                                                                                     
|10.15.2 |  | Promissory Note in the original amount of $67,864,000.00, dated
    as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.3.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                   
|10.15.3 |  | Guaranty of Recourse Obligations, dated as of June 25,
    2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.3.3
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                     
|10.15.4 |  | Cross-Guaranty, dated as of June 25, 2004, from the parties
    listed as Guarantors on the signature pages thereto to Merrill
    Lynch Mortgage Lending, Inc. (Incorporated by reference to
    Exhibit 10.3.4 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                                                                            
|10.15.5 |  | Conditional Assignment of Hotel Management Agreement, dated as
    of June 25, 2004, made by Lodgian Management Corp. and the
    Lodgian Entities listed on the signature pages thereto, to and
    for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.3.5 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).           
|10.15.6 |  | Conditional Assignment of Hotel Management Agreement (Beverage),
    dated as of June 25, 2004, made by Lodgian Management Corp.
    and the Lodgian Entities listed on the signature pages thereto,
    to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.3.6 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).
|10.15.7 |  | Assignment of Agreements, Licenses, Permits and Contracts, dated
    as of June 25, 2004, made by the Lodgian Entities listed on
    the signature pages thereto to Merrill Lynch Mortgage Lending,
    Inc. (Incorporated by reference to Exhibit 10.3.7 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                               
|10.15.8 |  | Cooperation Agreement, dated as of June 25, 2004, by and
    between the Mortgage Borrowers listed on the signature pages
    thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.3.8
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                           



---



##### Table of Contents



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Number   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.15.9  |  | Cash Management Agreement, dated as of June 25, 2004, among
    the Lodgian Entities listed on the signature pages thereto,
    Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National
    Association and Lodgian Management Corp. (Incorporated by
    reference to Exhibit 10.3.9 to the Companys Quarterly
    Report for the period ended June 30, 2004 (File
    No. 1-14537), filed on August 16, 2004).                                 
|10.15.10 |  | Environmental Indemnity, dated as of June 25, 2004, by the
    Lodgian Entities listed on the signature pages thereto and
    Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.3.10 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                          
|10.15.11 |  | Loan Modification Agreement (Fixed Rate #2), dated
    October 1, 2004, between the parties identified as
    Borrowers listed on the signature pages thereto and Merrill
    Lynch Mortgage Lending, Inc.                                                                                                                                                                                                                                              
|10.15.12 |  | Amended and Restated Promissory Note (Fixed Rate #2), dated
    October 1, 2004, between the parties identified as
    Borrowers listed on the signature pages thereto and Merrill
    Lynch Mortgage Lending, Inc.                                                                                                                                                                                                                                     
|10.16.1  |  | Loan and Security Agreement (Fixed Rate #3), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.4.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on August 16,
    2004).                                                                                     
|10.16.2  |  | Promissory Note in the original amount of $66,818,500.00, dated
    as of June 25, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.4.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                   
|10.16.3  |  | Guaranty of Recourse Obligations, dated as of June 25,
    2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.4.3
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                     
|10.16.4  |  | Cross-Guaranty, dated as of June 25, 2004, from the parties
    listed as Guarantors on the signature pages thereto to Merrill
    Lynch Mortgage Lending, Inc. (Incorporated by reference to
    Exhibit 10.4.4 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                                                                            
|10.16.5  |  | Conditional Assignment of Hotel Management Agreement, dated as
    of June 25, 2004, made by Lodgian Management Corp. and the
    Lodgian Entities listed on the signature pages thereto, to and
    for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.4.5 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).           
|10.16.6  |  | Conditional Assignment of Hotel Management Agreement (Beverage),
    dated as of June 25, 2004, made by Lodgian Management Corp.
    and the Lodgian Entities listed on the signature pages thereto,
    to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.4.6 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).
|10.16.7  |  | Assignment of Agreements, Licenses, Permits and Contracts, dated
    as of June 25, 2004, made by the Lodgian Entities listed on
    the signature pages thereto to Merrill Lynch Mortgage Lending,
    Inc. (Incorporated by reference to Exhibit 10.4.7 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                               
|10.16.8  |  | Cooperation Agreement, dated as of June 25, 2004, by and
    between the Mortgage Borrowers listed on the signature pages
    thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.4.8
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                           
|10.16.9  |  | Cash Management Agreement, dated as of June 25, 2004, among
    the Lodgian Entities listed on the signature pages thereto,
    Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National
    Association and Lodgian Management Corp. (Incorporated by
    reference to Exhibit 10.4.9 to the Companys Quarterly
    Report for the period ended June 30, 2004 (File
    No. 1-14537), filed on August 16, 2004).                                 



---



##### Table of Contents



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Number   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.16.10 |  | Environmental Indemnity, dated as of June 25, 2004, by the
    Lodgian Entities listed on the signature pages thereto and
    Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.4.10 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                          
|10.17.1  |  | Loan and Security Agreement (Fixed Rate #4), dated as of
    June 25, 2004, by and between the Borrowers listed on
    Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.5.1 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                     
|10.17.2  |  | Promissory Note in the original amount of $61,516,500.00, dated
    as of June 25, 2004, 2004, by the Borrowers listed on the
    signature pages thereto in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.5.2
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                             
|10.17.3  |  | Guaranty of Recourse Obligations, dated as of June 25,
    2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.5.3
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                                                                     
|10.17.4  |  | Cross-Guaranty, dated as of June 25, 2004, from the parties
    listed as Guarantors on the signature pages thereto to Merrill
    Lynch Mortgage Lending, Inc. (Incorporated by reference to
    Exhibit 10.5.4 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                                                                            
|10.17.5  |  | Conditional Assignment of Hotel Management Agreement, dated as
    of June 25, 2004, made by Lodgian Management Corp. and the
    Lodgian Entities listed on the signature pages thereto, to and
    for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.5.5 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).           
|10.17.6  |  | Conditional Assignment of Hotel Management Agreement (Beverage),
    dated as of June 25, 2004, made by Lodgian Management Corp.
    and the Lodgian Entities listed on the signature pages thereto,
    to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.5.6 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).
|10.17.7  |  | Assignment of Agreements, Licenses, Permits and Contracts, dated
    as of June 25, 2004, made by the Lodgian Entities listed on
    the signature pages thereto to Merrill Lynch Mortgage Lending,
    Inc. (Incorporated by reference to Exhibit 10.5.7 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                               
|10.17.8  |  | Cooperation Agreement, dated as of June 25, 2004, by and
    between the Mortgage Borrowers listed on the signature pages
    thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage
    Lending, Inc. (Incorporated by reference to Exhibit 10.5.8
    to the Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                           
|10.17.9  |  | Cash Management Agreement, dated as of June 25, 2004, among
    the Lodgian Entities listed on the signature pages thereto,
    Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National
    Association and Lodgian Management Corp. (Incorporated by
    reference to Exhibit 10.5.9 to the Companys Quarterly
    Report for the period ended June 30, 2004 (File
    No. 1-14537), filed on August 16, 2004).                                 
|10.17.10 |  | Environmental Indemnity, dated as of June 25, 2004, by the
    Lodgian Entities listed on the signature pages thereto and
    Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.5.10 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                          
|10.17.11 |  | Loan Modification Agreement (Fixed Rate #4), dated
    October 1, 2004, between the parties identified as
    Borrowers listed on the signature pages thereto and Merrill
    Lynch Mortgage Lending, Inc.                                                                                                                                                                                                                                              
|10.17.12 |  | Amended and Restated Promissory Note (Fixed Rate #4), dated
    October 1, 2004, between the parties identified as
    Borrowers listed on the signature pages thereto and Merrill
    Lynch Mortgage Lending, Inc.                                                                                                                                                                                                                                     



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|10.18   |  | General Form of Mortgage, Assignment of Leases and Rents and
    Security Agreement by [Property Owner Name](Mortgagor) to and
    for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.6 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                 
|10.19   |  | General Form of Deed of Trust, Assignment of Leases and Rents
    and Security Agreement (Credit Line Deed of Trust) by [Property
    Owner Name](Mortgagor) to and for the benefit of Merrill Lynch
    Mortgage Lending, Inc. (Incorporated by reference to
    Exhibit 10.7 to the Companys Quarterly Report for the
    period ended June 30, 2004 (File No. 1-14537), filed
    on August 16, 2004).
|10.20   |  | General Form of Deed to Secure Debt, Assignment of Leases and
    Rents and Security Agreement by Property Owner Name](Mortgagor)
    to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
    (Incorporated by reference to Exhibit 10.8 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                       
|10.21   |  | Preferred Share Exchange Agreement, dated June 22, 2004, by
    and among Lodgian, Inc. and the record and/or beneficial
    stockholders as signatories thereto. (Incorporated by reference
    to Exhibit 10.9 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                              
|10.22   |  | Registration Rights Agreement, dated June, dated June 22,
    2004, by and among Lodgian, Inc. and the signatories thereto.
    (Incorporated by reference to Exhibit 10.10 to the
    Companys Quarterly Report for the period ended
    June 30, 2004 (File No. 1-14537), filed on
    August 16, 2004).                                                                                               
|10.23   |  | Employment Agreement with W. Thomas Parrington, dated
    December 18, 2003 (Incorporated by reference to
    Exhibit 10.12 to the Companys Annual Report for the
    period ended December 31, 2003 (File No. 1-14537),
    filed on March 9, 2004).                                                                                                                                                    
|10.24   |  | Restricted Unit Award Agreement with W. Thomas Parrington, dated
    as of July 15, 2003 (Incorporated by reference to
    Exhibit 10.15.1 to Amendment No. 1 to the
    Companys Registration Statement on Form S-1 (File
    No. 333-113410), filed on April 23, 2004).                                                                                                                                
|10.25   |  | Restricted Unit Award Agreement with W. Thomas Parrington, dated
    as of April 9, 2004 (Incorporated by reference to
    Exhibit 10.11 to the Companys Quarterly Report for
    the period ended June 30, 2004 (File No. 1-14537),
    filed on August 16, 2004).                                                                                                                                      
|10.26   |  | Letter Agreement, dated February 4, 2005, between
    W. Thomas Parrington and Lodgian, Inc. related to
    Mr. Parringtons waiver of his 2004 Annual Performance
    Bonus.                                                                                                                                                                                                                             
|10.27   |  | Employment Agreement between Lodgian, Inc. and Daniel E. Ellis,
    dated May 2, 2004 (Incorporated by reference to
    Exhibit 10.4 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                                        
|10.28   |  | Employment Agreement between Lodgian, Inc. and Manuel E. Artime,
    dated May 10, 2004 (Incorporated by reference to
    Exhibit 10.5 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                                      
|10.29   |  | Release Agreement, dated January 31, 2005, between Lodgian,
    Inc. and Manuel E. Artime.                                                                                                                                                                                                                                                                                                                
|10.30   |  | Employment Agreement between Lodgian, Inc. and Michael W.
    Amaral, dated May 4, 2004 (Incorporated by reference to
    Exhibit 10.6 to the Companys Quarterly Report for the
    period ended March 31, 2004 (File No. 1-14537), filed
    with the Commission on May 14, 2004).                                                                                                                      
|10.31   |  | Employment Agreement between Lodgian, Inc. and Samuel J.
    Davis, dated May 14, 2004 (Incorporated by reference to
    Exhibit 10.19 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1 (File
    No. 333-113410), filed on June 4, 2004.).                                                                                                                                     
|10.32   |  | Executive Employment Agreement between Lodgian, Inc. and
    Linda B. Philp, dated February 7, 2005.                                                                                                                                                                                                                                                                                                      
|10.33   |  | Stock Option Agreement, dated January 31, 2005, between
    Linda B. Philp and Lodgian, Inc.                                                                                                                                                                                                                                                                                                              
|10.34   |  | Incentive Stock Option Agreement, dated January 31, 2005,
    between Linda B. Philp and Lodgian, Inc.                                                                                                                                                                                                                                                                                                    
|10.35   |  | Incentive Stock Option Agreement, dated February 28, 2005,
    between Daniel G. Owens and Lodgian, Inc.                                                                                                                                                                                                                                                                                                  



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                              
|Number  |  | Description                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                              
|10.36   |  | Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc.
    (Incorporated by reference to Exhibit 10.5 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1 (File No. 333-1113410), filed on June 6,
    2004).                                            
|10.37   |  | Form of Incentive Stock Option Agreement.                                                                                                                                                                                                                                                    
|10.38   |  | Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective
    September 1, 2003 (Incorporated by reference to
    Exhibit 10.20.1 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1 (File
    No. 333-113410), filed on June 4, 2004).                           
|10.39   |  | Amendment No. 1 to the Lodgian, Inc. 401(k) Plan (As
    Amended and Restated Effective as of September 1, 2003)
    (Incorporated by reference to Exhibit 10.3 to the
    Companys Quarterly Report for the period ended
    March 31, 2004 (File No. 1-14537), filed on
    May 14, 2004).
|21.1    |  | Subsidiaries of Lodgian, Inc.                                                                                                                                                                                                                                                                
|31.1    |  | Sarbanes-Oxley Section 302 Certification by the CEO.                                                                                                                                                                                                                                         
|31.2    |  | Sarbanes-Oxley Section 302 Certification by the CFO.                                                                                                                                                                                                                                         
|32      |  | Sarbanes-Oxley Section 906 Certification by the CEO and CFO.