<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                --------------

                                   FORM 10-Q
                                        
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the Quarterly Period Ended June 30, 1997

                                       OR
                                        
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the Transition Period from __________ to __________


                         Commission File Number 0-27360
                                        
                                --------------

                          EXTENDED STAY AMERICA, INC.
             (Exact name of Registrant as specified in its charter)

                    Delaware                            36-3996573
         (State or other jurisdiction of             (I.R.S. Employer
         incorporation or organization)           Identification Number)


            450 EAST LAS OLAS BOULEVARD, FORT LAUDERDALE, FL     33301
                (Address of Principal Executive Offices)       (Zip Code)


      Registrant's telephone number, including area code:  (954) 713-1600
                                        
                                --------------

  Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  X     No_____
   -----

  At August 5, 1997, the registrant had issued and outstanding an aggregate of
95,359,890 shares of Common Stock.
<PAGE>
 
                                    PART I

                             FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                          EXTENDED STAY AMERICA, INC.

               Condensed Consolidated Balance Sheets (Unaudited)
                       (In thousands, except share data)

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                               June 30,    December 31,
                                                                                                 1997        1996 (1)
                                                                                               --------    ------------
<S>                                                                                            <C>         <C>
Current assets:
  Cash and cash equivalents................................................................    $174,998        $224,325
  Accounts receivable......................................................................       4,493           1,665
  Prepaid expenses.........................................................................       1,766             796
  Deferred income taxes....................................................................         356           1,143
  Other current assets.....................................................................         664           1,580
                                                                                               --------        --------
      Total current assets.................................................................     182,277         229,509
Property and equipment, net.................................................................    686,393         428,749
Deferred loan costs.........................................................................                      9,519
Other assets................................................................................        902             658
                                                                                               --------        --------
                                                                                               $869,572        $668,435
                                                                                               ========        ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable.........................................................................    $ 16,387        $ 14,827
  Accrued salaries and related expenses....................................................       2,282           1,694
  Due to related parties...................................................................          10             204
  Other accrued expenses...................................................................       3,125           3,463
  Accrued retainage........................................................................      13,922          11,371
   Deferred revenue........................................................................         789             179
                                                                                               --------        --------
      Total current liabilities............................................................      36,515          31,738
                                                                                               --------        --------
Deferred income taxes.......................................................................     11,072           7,983
                                                                                               --------        --------

Commitments
Shareholders' equity:
  Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued and
    outstanding............................................................................
  Common stock, $.01 par value, 500,000,000 shares authorized, 95,321,398 and 83,666,383
    shares issued and outstanding, respectively............................................         953             837

  Additional paid-in capital...............................................................     819,648         619,870
  Retained earnings........................................................................       1,384           8,007
                                                                                               --------        --------
      Total shareholders' equity...........................................................     821,985         628,714
                                                                                               --------        --------
                                                                                               $869,572        $668,435
                                                                                               ========        ========
</TABLE>
(1)  Derived from audited financial statements

    See notes to the unaudited condensed consolidated financial statements

                                       2
<PAGE>
 
                          EXTENDED STAY AMERICA, INC.

          Condensed Consolidated Statements of Operations (Unaudited)
                     (In thousands, except per share data)


<TABLE>
<CAPTION>



                                                               Three Months Ended                   Six Months Ended
                                                           ----------------------------        ----------------------------
                                                           June 30,           June 30,         June 30,           June 30,
                                                             1997               1996             1997               1996
                                                           --------          ----------        --------          ----------
<S>                                                        <C>               <C>               <C>               <C>
Revenue.................................................   $ 29,028           $ 8,035          $ 48,791           $13,629
                                                           --------           -------          --------           -------
Property operating expenses.............................     12,307             3,350            22,487             5,724
Corporate operating and property
    management expenses.................................      6,989             3,768            12,744             7,162
Merger, financing and other charges.....................     19,895                              19,895
Depreciation and amortization...........................      4,358             1,105             8,070             1,982
                                                           --------           -------          --------           -------
      Total costs and expenses..........................     43,549             8,223            63,196            14,868
                                                           --------           -------          --------           -------

Loss from operations....................................    (14,521)             (188)          (14,405)           (1,239)

Interest income.........................................      3,447             2,947             7,434             4,429
                                                           --------           -------          --------           -------

Income (loss) before income taxes.......................    (11,074)            2,759            (6,971)            3,190

Provision (benefit) for income taxes....................     (1,981)            1,103              (348)            1,276
                                                           --------           -------          --------           -------

Net income (loss).......................................   $ (9,093)          $ 1,656          $ (6,623)          $ 1,914
                                                           ========           =======          ========           =======

Net income (loss) per common share......................    $($0.10)            $0.02            $(0.07)            $0.03
                                                           ========           =======          ========           =======

Weighted average common equivalent shares outstanding...     95,306            68,240            92,991            60,843
                                                           ========           =======          ========           =======
</TABLE>
                                                                                
     See notes to the unaudited condensed consolidated financial statements

                                       3
<PAGE>
 
                          EXTENDED STAY AMERICA, INC.

          Condensed Consolidated Statements of Cash Flows (Unaudited)
                                 (In thousands)
                                        
<TABLE>
<CAPTION>
                                                             Six Months Ended
                                                           --------------------
                                                           June 30,    June 30,
                                                             1997       1996
                                                           ---------  ---------
<S>                                                        <C>        <C>
Cash flows from operating activities:
  Net income (loss)......................................  $  (6,623) $   1,914
  Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
    Depreciation and amortization........................      8,070      1,982
    Bad debt expense.....................................        208         62
    Merger costs.........................................      9,727
    Deferred loan costs..................................      9,667
    Write off of site deposits and preacquisition costs..      1,970        583
    Deferred income taxes................................      4,488        (51)
    Changes in operating assets and liabilities..........     (4,687)     1,525
                                                           ---------  ---------
      Net cash provided by operating activities..........     22,820      6,015
                                                           ---------  ---------
Cash flows from investing activities:
  Acquisitions of extended stay properties...............                (3,746)
  Additions to property and equipment....................   (262,248)   (71,357)
  Payments for merger costs..............................     (8,789)
  Purchase of investments available for sale.............               (38,829)
  Payments for other assets..............................       (244)      (749)
                                                           ---------  ---------
      Net cash used in investing activities..............   (271,281)  (114,681)
                                                           ---------  ---------
Cash flows from financing activities:
  Proceeds from long-term debt...........................                 7,000
  Payments of long-term debt and note payable............               (11,705)
  Proceeds from issuance of common stock.................    199,282    365,807
  Additions to deferred loan costs.......................       (148)    (3,672)
  Payments for prepaid registration costs................                   (52)
                                                           ---------  ---------
      Net cash provided by financing activities..........    199,134    357,378
                                                           ---------  ---------
Increase (decrease) in cash and cash equivalents.........    (49,327)   248,712
Cash and cash equivalents at beginning of period.........    224,325    125,915
                                                           ---------  ---------
Cash and cash equivalents at end of period...............  $ 174,998  $ 374,627
                                                           =========  =========
Noncash investing and financing transactions:
  Issuance of common stock for acquisition of extended
   stay properties.......................................  $          $  22,422
                                                           =========  =========
  Capitalized or deferred items included in accounts
   payable and accrued liabilities.......................  $  25,410  $   3,868
                                                           =========  =========
Supplemental cash flow disclosures:
  Cash paid for income taxes.............................  $   1,000  $
                                                           =========  =========
</TABLE>
                                                                                
     See notes to the unaudited condensed consolidated financial statements

                                       4
<PAGE>
 
                          EXTENDED STAY AMERICA, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 June 30, 1997


NOTE 1 -- BASIS OF PRESENTATION

     Extended Stay America, Inc. ("ESA") was organized on January 9, 1995 as a
Delaware corporation to develop, own and manage extended stay lodging
facilities.

     On April 11, 1997, ESA, ESA Merger Sub, Inc. ("Merger Sub"), a wholly-owned
subsidiary of ESA, and Studio Plus Hotels, Inc. ("SPH") consummated a merger
(the "Merger") pursuant to which SPH was merged with and into Merger Sub and
each of the 12,557,786 shares of SPH common stock issued and outstanding on such
date were converted into the right to receive 15,410,915 shares of common stock,
par value $.01 per share, of ESA ("Common Stock") and options to purchase
1,072,565 shares of SPH common stock were converted into options to purchase
1,316,252 shares of Common Stock. The Merger was accounted for using the
pooling of interests method of accounting. The accompanying unaudited condensed
consolidated financial statements of ESA and SPH (together, the "Company") give
effect to the Merger as if it had been consummated as of the beginning of the
periods presented. All significant intercompany accounts and transactions have
been eliminated in consolidation. These financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.

     The condensed consolidated balance sheet data at December 31, 1996 was
derived from the audited consolidated financial statements of ESA and SPH but
does not include all disclosures required by generally accepted accounting
principles.

     In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month and six-month periods ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Company's
supplemental financial statements included in Form S-3 filed July 29, 1997, 
ESA's Annual Report on Form 10-K and SPH's Annual Report on Form 10-K for the
year ended December 31, 1996.

     On May 9, 1996, the Board of Directors of the Company declared a 2-for-1
stock split effected in the form of a stock dividend payable on July 19, 1996 to
shareholders of record as of the close of business on July 5, 1996. Accordingly,
Common Stock outstanding or issued, the weighted average number of common and
common equivalent shares and per share amounts have been retroactively adjusted
to give effect to the stock split.

     In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 "Earnings per share" ("SFAS
128") This statement establishes standards for computing and presenting earnings
per share ("EPS") and supersedes APB Opinion No. 15, "Earnings per share". SFAS
128 replaces the presentation of primary EPS with a presentation of basic EPS
which excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding during
the period. This statement also requires dual presentation of basic EPS and
diluted EPS on the face of the income statement for all periods presented.
Diluted EPS is computed similarly to fully diluted EPS pursuant to APB Opinion
No. 15, with some modifications. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997. Early adoption is not
permitted and requires restatement of all prior period EPS data presented after
the effective date.

     Certain previously reported amounts have been reclassified to conform with
the current period's presentation.

                                       5
<PAGE>
 
NOTE 2 -- ACQUISITION OF EXTENDED STAY PROPERTIES

     During 1996, the Company acquired ten (10) extended stay facilities from a
number of unrelated sellers (the "Acquisitions") for approximately $59.5
million, which was paid for by the issuance of approximately 4.5 million shares
of Common Stock valued at approximately $55.2 million and approximately $4.3
million in cash. As a part of the Acquisitions, the Company assumed liabilities
aggregating approximately $470,000 under certain leases for personal property
which were subsequently paid.

     The Acquisitions were accounted for using the purchase method of accounting
and, accordingly, the results of operations of the properties are included in
the consolidated statements of operations from the dates of acquisition.

     The following unaudited pro forma condensed consolidated statement of
operations for the six months ended June 30, 1996 is presented as if the
acquisition of all properties acquired during 1996 and the related issuances of
shares of Common Stock had occurred on January 1, 1996. The pro forma condensed
statement of operations is not necessarily indicative of what actual results of
operations of the Company would have been assuming such transactions had been
completed as of January 1, 1996, nor does it purport to represent the results of
operations for future periods.

<TABLE>
<CAPTION>
                                                                           Actual                            Pro forma     
                                                                         for the six                        for the six       
                                                                         months ended                       months ended  
                                                                           June 30,                           June 30,    
                                                                             1997                               1996       
                                                                     ---------------------             ----------------------
                                                                                  (Dollars and shares in thousands)
 
<S>                                                                  <C>                               <C>  
Total revenue..................................................      $              48,791             $               22,048
Total costs and expenses.......................................                     63,196                             24,425
                                                                     ---------------------             ---------------------- 
     (Loss) from operations....................................                    (14,405)                            (2,377)
 
Interest income................................................                      7,434                              4,429
                                                                     ---------------------             ---------------------- 
     Income (loss) before income taxes.........................                     (6,971)                             2,052
Provision (benefit) for income taxes...........................                       (348)                               821
                                                                     ---------------------             ---------------------- 
     Net (loss) income.........................................      $              (6,623)            $                1,231
                                                                     =====================             ======================
                                        
     Net income (loss) per common share........................      $              $(0.07)            $                 0.02
                                                                     =====================             ======================
     Weighted average common shares outstanding................                     92,991                             68,068
                                                                     =====================             ======================
</TABLE>
                                                                                

NOTE 3 -- INCOME TAXES

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases and operating loss and tax carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

     Income tax expense for the three months and six months ended June 30, 1996
differed from the amounts computed by applying the U.S. Federal income tax rate
of 35% primarily as a result of the impact of state and local income taxes. The
benefit from income taxes for the three months and six months ended June 30,
1997 differed from the amounts computed by applying the U.S Federal income tax
rate of 35% primarily as a result of the impact of nondeductible expenses
associated with the Merger and state and local taxes.

                                       6
<PAGE>
 
NOTE 4 -- OTHER MATTERS

     On April 11, 1997, the Company's shareholders approved an amendment of the
Restated Certificate of Incorporation increasing the number of authorized shares
of Common Stock from 200 million to 500 million shares.

     In connection with the Merger, the Company recorded in the quarter ended
June 30, 1997 a one-time, pre-tax charge of $9.7 million representing merger
expenses and costs associated with the integration of SPH operations following
the Merger.

     During the quarter ended June 30, 1997, the Company announced that its
Board of Directors had approved a plan to have the Common Stock listed on the
New York Stock Exchange, Inc. ("NYSE") and to move trading in the Common Stock
from the Nasdaq National Market to the NYSE. The Common Stock began trading on
the NYSE on June 30, 1997. The Company has recorded a one-time, pre-tax charge
of $500,000 in connection with listing of the Common Stock on the NYSE in the
quarter ended June 30, 1997.

     The Company has accepted from Morgan Stanley Senior Funding, Inc. a
commitment to provide a $500 million senior secured revolving credit facility
(the "Revolving Facility") which is to be used for general corporate purposes,
including the construction and acquisition of extended stay lodging properties.
The Revolving Facility will be a five year senior secured facility structured as
a corporate bank loan and syndicated to relationship banks. Upon execution of
the Revolving Facility the Company will terminate its two existing mortgage loan
facilities, which provide for an aggregate of $400 million in available mortgage
loans. Accordingly, the Company has recorded a one-time, pre-tax charge of $9.7
million. The charge represents deferred costs associated with its previous
mortgage facilities and has been reflected in the Company's financial results
for the quarter ended June 30, 1997.


Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

General

     Extended Stay America, Inc. ("ESA"), was organized on January 9, 1995, as a
Delaware corporation to develop, own, and manage extended stay lodging
facilities.

     Studio Plus Hotels, Inc. ("SPH") was formed on December 19, 1994, to
acquire, through merger and exchange of partnership interests all of the assets
of Studio Plus, Inc. and the corporations and partnerships (collectively, the
"SPH Predecessor Entities") which owned and operated StudioPLUS extended stay
hotels. On June 26, 1995, SPH completed an initial public offering (the "SPH
IPO"). Prior to completion of the SPH IPO, SPH acquired, through merger and
exchange of SPH common stock for partnership interests, the assets of the SPH
Predecessor Entities which owned and operated all of the StudioPLUS extended
stay hotel properties then in operation or under development (the "Corporate
Organization"). The acquisition of the interests of the controlling shareholder
or partner and affiliates of the SPH Predecessor Entities was accounted for as a
pooling of interests.

     On April 11, 1997, ESA, ESA Merger Sub, Inc. ("Merger Sub"), a wholly-owned
subsidiary of ESA, and SPH consummated a merger (the "Merger") pursuant to which
SPH was merged with and into Merger Sub and each of the 12,557,786 shares of SPH
common stock that were outstanding on the closing date were converted into the
right to receive 15,410,915 shares of common stock, par value $.01 per share, of
ESA ("Common Stock") and options to purchase 1,072,565 shares of SPH common
stock were converted into options to purchase 1,316,252 shares of Common Stock.
As a result of the Merger, SPH is a wholly-owned subsidiary of ESA. The
accompanying unaudited condensed consolidated financial statements of ESA and
SPH (together the "Company") contained elsewhere in this Report on Form 10-Q
give effect to the Merger as if it had been consummated as of the beginning of
the periods presented.

     The Company owns and operates three brands in the extended stay lodging
market--StudioPLUS\TM\ hotels ("StudioPLUS"), EXTENDED STAYAMERICA Efficiency
Studios ("EXTENDED STAY"), and Crossland 

                                       7
<PAGE>
 
Economy Studios\SM\ ("Crossland"), each designed to appeal to different price
points below $500 per week. All three brands offer the same core components: a
living/sleeping area; a fully-equipped kitchen or kitchenette; and a bathroom.
EXTENDED STAY rooms are designed to compete in the economy category. Crossland
guest rooms are typically smaller than EXTENDED STAY rooms and are targeted for
the budget category, while StudioPLUS facilities serve the mid-price category
and generally feature larger guest rooms and also generally offer an exercise
facility and a swimming pool.

     The following is a summary of the Company's selected development and
operational results for the three-month and six-month periods ended June 30,
1997 and June 30, 1996.

<TABLE>
<CAPTION>
                                      Total              Total              Total                                   Average
                                    Facilities        Facilities          Facilities           Average               Weekly
                                       Open            Developed           Acquired           Occupancy               Rate
                                   ------------     ---------------     --------------     ----------------      --------------
<S>                                <C>                <C>                 <C>                <C>                   <C>
Three Months Ended June 30, 1997       116                23                   -                  78%                 $264
Three Months Ended June 30, 1996        35                 3                   2                  83%                 $261

Six Months Ended June 30, 1997         116                41                   -                  72%                 $261
Six Months Ended June 30, 1996          35                 6                   5                  83%                 $254
</TABLE>
                                        
     Occupancy rates are determined by dividing the guest rooms occupied on a
daily basis by the total number of guest rooms. Average weekly room rates are
determined by dividing room revenue by the number of rooms occupied on a daily
basis for the applicable period and multiplying by seven. The average weekly
room rates vary from standard room rates due primarily to (i) stays of less than
one week, which are charged at a higher nightly rate, (ii) higher weekly rates
for rooms which are larger than the standard rooms, and (iii) additional charges
for more than one person per room. Future occupancy and room rates may be
impacted by a number of factors including the number and geographic location of
new facilities, as well as the season in which such facilities commence
operations. There can be no assurance that the foregoing occupancy and room
rates can be maintained.

     In addition, as of June 30, 1997, the Company had 98 facilities under
construction and options to purchase 106 sites for development. The Company
expects to complete the construction of the facilities currently under
construction generally within the next twelve months and to commence
construction on the majority of the sites under option at various dates in the
future. There can be no assurance, however, that the Company will complete the
acquisition of the sites under option or, if acquired, commence construction
within similar time periods. The Company's ability to complete development of
sites under construction and under option may be materially impacted by various
factors including zoning, permitting, environmental, due diligence issues, and
weather-induced construction delays.

     The following is a summary of the Company's development status as of June
30, 1997, by brand:


<TABLE>
<CAPTION>

                                                 Crossland           EXTENDED STAY           StudioPLUS             Total
                                             ----------------      -----------------      -----------------     -------------
<S>                                            <C>                   <C>                    <C>                   <C>
Operating Facilities                                 1                     74                     41                 116
Facilities Under Construction                        6                     62                     30                  98
Sites Under Option                                  37                     51                     18                 106
</TABLE>

     During the quarter ended June 30, 1997, the Company completed construction
of 23 properties, and commenced construction on 39 additional properties. For
the six months ended June 30, 1997, the Company completed construction of 41
properties, and commenced construction on 78 additional properties. During the
quarter ended June 30, 1996, the Company completed construction of 3 properties,
acquired 2 operating properties and commenced construction on 24 additional
properties. For the six months ended June 30, 1996, the Company completed
construction of 6 properties, acquired 5 operating properties and commenced
construction on 37

                                       8
<PAGE>
 
properties. As of June 30, 1996, the Company had 35 operating facilities, 47
facilities under construction and options to purchase 102 sites for development
in 33 states.

Results of Operations

Property Operations. The following is a summary of the properties operated
during the specified periods and the related average occupancy and weekly rates:

<TABLE>
<CAPTION>
                                                       For the three months ended
                              ---------------------------------------------------------------------------
                                             June 30, 1997                      June 30, 1996
                              ------------------------------------   ------------------------------------  
                                                           Average                                Average
                              Facilities                    Weekly   Facilities                    Weekly 
                                 Open         Occupancy      Rate       Open         Occupancy      Rate
                              ----------      ---------    -------   ----------      ---------    -------  
<S>                           <C>             <C>          <C>          <C>           <C>         <C> 
Crossland                          1             97%         $180       N/A             N/A          N/A
EXTENDED STAY                     74             76%         $249         9             82%         $219
StudioPLUS                        41             84%         $308        26             84%         $283
                              ----------      ---------    -------   ----------      ---------    -------  

Total                            116             78%         $264        35             83%         $261
                              ==========      =========    =======   ==========      =========    =======  
                   
</TABLE>

<TABLE>
<CAPTION>
                                                       For the three months ended
                              ---------------------------------------------------------------------------
                                             June 30, 1997                      June 30, 1996
                              ------------------------------------   ------------------------------------  
                                                           Average                                Average
                              Facilities                    Weekly   Facilities                    Weekly 
                                 Open         Occupancy      Rate       Open         Occupancy      Rate
                              ----------      ---------    -------   ----------      ---------    -------  
 
<S>                      <C>          <C>              <C>          <C>          <C>             <C>
Crossland                          1             85%         $176       N/A             N/A          N/A
EXTENDED STAY                     74             69%         $246         9             85%         $211
StudioPLUS                        41             80%         $300        26             82%         $273
                              ----------      ---------    -------   ----------      ---------    -------  
Total                            116             72%         $261        35             83%         $254
                              ==========      =========    =======   ==========      =========    =======  
</TABLE>


     The decline in average occupancy for the quarter and the six months ended
June 30, 1997 compared to the comparable periods in 1996 reflects the lower
occupancy typically experienced during the pre-stabilization periods for the 41
facilities (35% of all opened facilities) which commenced operations during the
first six months of 1997 and the 40 facilities (34% of all opened facilities)
which commenced operations during the last six months of 1996. The increase in
average weekly room rates for the quarter and the six months ended June 30, 1997
compared to the same periods in 1996 reflects the geographic dispersion of
facilities opened and the standard weekly rates in those markets, along with
increases in rates charged in previously opened properties. The average weekly
room rate for the 24 properties that were in operation throughout both periods
increased by 4.0% for the quarter and 4.6% for the six months.

     The Company recognized total revenues for the quarter ended June 30, 1997
of $29.0 million, compared with $8.0 million during the same period in 1996, and
$48.8 million for the six months ended June 30, 1997, compared with $13.6
million during the same period in 1996. The $21.0 million increase in revenue
for the second quarter of 1997 as compared to the second quarter of 1996 was
attributable to approximately $20.7 million of revenue generated by new or
acquired properties in 1996 and 1997 and approximately $292,000 in increased
revenue from the 24 properties that were in operation throughout both periods.
Similarly, the $35.2 million increase in revenue for the six months ended June
30, 1997 as compared to the six months ended June 30, 1996, was attributable to
$34.8 million of revenue generated by new or acquired facilities in 1996 and
1997 and approximately $437,000 in incremental revenue from the 24 properties
that were in operation during both periods. Property operating expenses,
consisting of all expenses directly allocable to the operation of the facilities
but excluding any allocation of corporate operating expenses and depreciation,
were $12.3 million, or 42% of total revenue, for the quarter ended June 30,
1997, compared to $3.4 million, or 42%, for the quarter ended June 30, 1996.
Property operating expenses for the six months ended June 30, 1997 were $22.5
million, or 46%, of total revenue compared to $5.7 million, or


                                       9
<PAGE>
 
42%, of total revenue for the six months ended June 30, 1996. The increase in
the property operating expenses in relation to total revenue in the first six
months of 1997 as compared to the same period in 1996 was primarily a result of
lower occupancies and revenue for the prestabilization period of the 41
facilities that commenced operations during the first six months of 1997.

     The provision for depreciation and amortization of lodging facilities of
$4.1 million and $7.6 million for the quarter and the six months ended June
30, 1997, respectively, and $1.0 million and $ 1.8 million for the same periods
in 1996, was provided using the straight-line method over the estimated useful
lives of the assets. These provisions reflect a pro rata allocation of the
annual depreciation and amortization charge for the period for which the
facilities were in operation. The increase in depreciation for the three months
and six months ended June 30, 1997 as compared to comparable periods in 1996 is
due to the operation of 63 and 81 additional facilities in the respective
periods.

Corporate Operations. Corporate operating and property management expenses
include all expenses not directly related to the development or operation of
lodging facilities. The Company incurred expenses of $7 million, or 24%, of
total revenue for the quarter ended June 30, 1997 and $3.8 million, or 47%, of
total revenue for the quarter ended June 30, 1996. Corporate operating and
property management expenses for the six months ended June 30, 1997 and 1996
were $12.7 million and $7.2 million, respectively, or 26% and 53% of total
revenue, respectively. The expenses consist primarily of personnel expenses,
professional and consulting fees, and related travel expenses including costs
that are not directly related to a site that will be developed by the Company.
The increases in the amount of these expenses for the periods ending in 1997 as
compared to comparable periods of the previous year reflect the impact of
additional personnel and related expenses in connection with the Company's
increased level of operating facilities and site development. The total amount
of these expenses are expected to increase in the future with the development of
additional facilities.

     In connection with the Merger, the Company recorded in the second quarter
of 1997 a one-time, pre-tax charge of $9.7 million representing merger expenses
and costs associated with the integration of SPH operations following the
Merger. Management believes that these charges are not recurring in nature and
will not affect the future results of operations.

     During the quarter ended June 30, 1997, the Company announced that its
Board of Directors had approved a plan to have the Common Stock listed on the
New York Stock Exchange, Inc. ("NYSE") and to move trading in the Common Stock
from the Nasdaq National Market to the NYSE. The Common Stock began trading on
the NYSE on June 30, 1997. The Company has recorded a one-time pre-tax charge of
$500,000 in connection with listing of the Common Stock on the NYSE.

     The Company has accepted from Morgan Stanley Senior Funding, Inc. ("MSSF")
a commitment to provide a $500 million senior secured revolving credit facility
(the "Revolving Facility") which is to be used for general corporate purposes,
including the construction and acquisition of extended stay lodging properties.
The Revolving Facility will be a five year senior secured facility structured as
a corporate bank loan and syndicated to relationship banks. Upon execution of
the Revolving Facility, the Company will terminate its two existing mortgage
loan facilities, which provide for an aggregate of $400 million in available
mortgage loans. Accordingly, the Company has recorded a one-time, pre-tax charge
of $9.7 million. The charge represents deferred costs associated with its
mortgage facilities and has been reflected in the Company's financial results
for the three months and six months ended June 30, 1997. In addition to the 
Revolving Facility, the Company expects to issue approximately $300 million of 
unsecured subordinated debt as part of an overall financing plan that is 
expected to increase the Company's credit availability to $800 million.

     The Company realized interest income of $3.4 million and $7.4 million for
the quarter and six months, respectively, ended June 30,1997 and $2.9 million
and $4.4 million for the same periods in 1996. Interest income is primarily
attributable to the investment of funds received from offerings of the Company's
Common Stock.

     The Company recognized income tax benefits of $2.0 million and $348,000 for
the quarter and the six months, respectively, ended June 30, 1997 and incurred
income tax expense of $1.1 million and $1.3 million for the respective
comparable periods in 1996. The income tax benefits for 1997 differ from the
expected tax rate of 40% primarily due to permanent tax differences relating to
non-deductible merger expenses. Management expects that the annualized effective
tax rate, not inclusive of the effect of the permanent differences associated
with the Merger, will be approximately 40%.

                                      10
<PAGE>
 
     Depreciation and amortization in the amount of $213,000 and $422,000 for
the quarter and six months ended June 30, 1997, respectively, and $80,000 and
$145,000 for the respective comparable periods in 1996, were provided using the
straight-line method over the estimated useful lives of the assets for assets
not directly related to the operation of the facilities, including primarily
organization costs and office furniture and equipment.

Liquidity and Capital Resources

     The Company had cash and cash equivalents of $175 million and $224 million
as of June 30, 1997 and December 31, 1996, respectively. Substantially all of
the cash balances were invested, utilizing domestic commercial banks and other
financial institutions, in short-term commercial paper and other securities
having credit ratings of A1/P1 or equivalent. The market value of the securities
held approximates the carrying amount. During 1996 SPH temporarily invested
proceeds from an offering of its common stock in investments with maturities
greater than 90 days. Accordingly, these investments in a mutual fund (primarily
in municipal bonds) and in United States Government obligations have been
classified as investments available-for-sale in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". During the six months ended June 30, 1996,
purchases of such investments available-for-sale aggregated $38.8 million.

     During the six-month period ended June 30, 1996, the Company acquired five
extended stay facilities from a number of unrelated sellers for approximately
$26.4 million, which was paid for by the issuance of approximately 1.8 million
shares of Common Stock, valued at approximately $22.7 million, and approximately
$3.7 million in cash. In addition, approximately $71.4 million was used to
acquire land and develop and furnish the 37 sites under construction during the
six months ended June 30, 1996.

     In February 1996, SPH increased its existing revolving line of credit (the
"Line of Credit") maturing in June 1998, from $30 million to $50 million. The
Line of Credit was terminated upon consummation of the Merger. For the six
months ended June 30, 1996, SPH received proceeds from borrowings under the Line
of Credit totaling $7.0 million and made payments on the Line of Credit totaling
$11.1 million. ESA made payments of $630,000 during the six months ended 
June 30, 1996 on a note payable which was issued in 1995 for the purchase of a
property site. At December 31, 1996 there were no outstanding borrowings under
the Line of Credit. SPH incurred deferred loan costs associated with the Line of
Credit of $232,000 in the six-month period ended June 30, 1996.

     In October 1995, ESA executed a credit facility agreement providing up to
$200 million in mortgage financing for completed facilities, subject to certain
conditions and limitations. ESA entered into an additional credit facility
agreement in May 1996 which provides up to $300 million in mortgage financing,
subject to certain conditions and limitations, for completed facilities. At that
time, ESA reduced the size of the original mortgage facility from $200 million
to $100 million. As a result of these transactions, the Company has two credit
facility agreements which provide for a total of $400 million in mortgage
financing. No advances have been made under either facility. The Company made
payments for deferred loan costs in connection with the mortgage facilities
totaling $148,000 and $3.7 million during the respective six-month periods ended
June 30, 1997 and 1996.

     In April 1996, SPH closed a public offering of 4,855,347 shares of common
stock, and 319,653 shares sold by selling shareholders, at $16.83 per share
(number of shares and price per share have not been adjusted for the Merger).
Net cash proceeds to SPH were approximately $76.8 million, which excluded any
proceeds from the sales by selling shareholders.

     On June 5, 1996, ESA closed a public offering of 19,550,000 shares of its
Common Stock at a public offering price of $15.50 per share. The proceeds to the
Company of such offering were approximately $289 million, net of offering
expenses.

     During the six-month period ended June 30, 1997, additions to property and
equipment totaling $262.2 million were used to acquire, develop and furnish the
139 sites under construction during that period.

                                       11
<PAGE>
 
     During the quarter ended June 30, 1997, the Company made payments of $8.8
million for costs associated with the Merger. Management believes that these
costs are not recurring and that they will not have an impact on future
earnings.

     On February 6, 1997, ESA issued 11,500,000 shares of its Common Stock to a
number of institutional investors in a private placement transaction (the
"Private Placement"). The purchase price in the Private Placement was $17.625
per share, for an aggregate amount of approximately $203 million. Net proceeds
received by ESA from the Private Placement were approximately $198 million. The
Company has registered under the Securities Act all of the shares of Common
Stock issued in the Private Placement so that the holders of such shares may
make resales in the public market of those shares. In addition, proceeds of
approximately $1.2 million were received as a result of the exercise of options
to purchase the Company's Common Stock during the six months ended June 30,
1997.

     The Company has accepted from MSSF a commitment to provide the Revolving
Facility which is to be used for general corporate purposes, including the
construction and acquisition of extended stay lodging properties. Upon execution
of the Revolving Facility, the Company will terminate its two existing mortgage
loan facilities. 

     The Company had commitments to complete construction of additional extended
stay properties with a total cost of approximately $500 million at June 30,
1997. The Company expects to finance the construction and development of its
lodging facilities principally with its cash balances, issuances of equity or
debt securities, and loans under the Revolving Facility.

     In the future, the Company may seek to increase the amount of its credit
facilities, negotiate additional credit facilities, or issue equity or corporate
debt instruments. Any debt incurred or issued by the Company may be
collateralized, with a fixed or variable interest rate, and may be subject to
such terms as the Board of Directors of the Company deems prudent. The Company
expects that it will need to procure additional financing over time, although
there can be no assurance that such financing will be available when needed.

Seasonality and Inflation

     Based upon the operating history of the Company's facilities, management
believes that extended stay lodging facilities are not as seasonal in nature as
the overall lodging industry. Management does expect, however, that occupancy
and revenues may be lower than average during the first and fourth quarters of
each calendar year. Because many of the Company's expenses do not fluctuate with
occupancy, such declines in occupancy may cause fluctuations or decreases in the
Company's quarterly earnings.

     The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenue or operating results of the
Company during any of the periods presented. There can be no assurance, however,
that inflation will not effect future operating or construction costs.

Special Note on Forward-Looking Statements

     The statements contained in this Report on Form 10-Q that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. A number of important factors
could cause the Company's actual results for future periods to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company. These factors include, among other things: the Company's limited
operating history and uncertainty as to the Company's future profitability; the
ability to meet construction and development schedules and budgets; the ability
to develop and implement operational and financial systems to manage rapidly
growing operations; the uncertainty as to the consumer demand for extended stay
lodging; increasing competition in the extended stay lodging market; the ability
to integrate and successfully operate acquired properties and the risks
associated with such properties; the ability to obtain financing on acceptable
terms to finance the Company's growth strategy; and general economic conditions
as they may impact the overall lodging industry.

                                      12
<PAGE>
 
                                     PART II
                                        
                               OTHER INFORMATION
                                           
Item 2.  CHANGES IN SECURITIES

(c)  Recent Sales of Unregistered Securities

     None

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS      

The following summarizes the votes of the Special Meeting of the Company's
stockholders held on April 11, 1997:

<TABLE>
<CAPTION>
Matter                              For              Against           Abstain         Non-Vote          Shares Voted
------                              ---              -------           -------         --------          ------------
<S>                          <C>                <C>                <C>              <C>              <C>
Approval and adoption of
 the Merger Agreement
 among ESA, Merger Sub,
 and SPH                         56,017,900             15,815          249,983        4,799,025            61,082,723
 
Matter
------
Approval of an amendment
 to the ESA Certificate of
 Incorporation increasing
 the authorized shares of
 Common Stock from 200
 million to 500 million          56,957,515          4,103,055           17,253            4,900            61,082,723
 
Matter
------
Approval of the Extended
 Stay America, Inc.
 Amended 1997 Employee
 Stock Option Plan               47,495,948          8,732,229           55,521        4,799,025            61,082,723
 
</TABLE>

The following summarizes the votes at the Annual Meeting of the Company's
stockholders held on May 12, 1997:

<TABLE>
<CAPTION>
Matter                              For              Against           Abstain         Non-Vote          Shares Voted
------                              ---              -------           -------         --------          ------------
Election of Directors -
<S>                              <C>                 <C>               <C>             <C>               <C> 
H. Wayne Huizenga                64,845,169             --              14,561            --             64,859,730
George D. Johnson, Jr.           64,845,155             --              14,575            --             64,859,730
Norwood Cowgill, Jr.             64,845,169             --              14,561            --             64,859,730
Donald F. Flynn                  64,845,169             --              14,561            --             64,859,730
Stewart H. Johnson               64,845,169             --              14,561            --             64,859,730
John J. Melk                     64,845,169             --              14,561            --             64,859,730
Peer Pederson                    64,845,169             --              14,561            --             64,859,730
 
Matter
------
Ratification of the
 appointment of
 Coopers & Lybrand L.L.P.
 as Independent Auditors
 for the Company for 1997        64,835,108            4,650           19,972            --              64,859,730
</TABLE>

                                      13
<PAGE>
 
Item 6.  EXHIBITS AND REPORTS ON FORM 8-K       
 
(a)                  Exhibits
   Exhibit
   Number                  Description of Exhibit
   ------                  ----------------------

     2.1  Agreement and Plan of Merger dated as of January 16, 1997 by and among
          the Company, Merger Sub, and Studio Plus (incorporated by reference to
          Exhibit 2.1 to the Company's Current Report on Form 8-K dated January
          16, 1997)
    10.1  Confidential Separation Agreement and General Release, dated as of
          June 1, 1997, between the Company and Harold E. Wright
    10.2  1997 Employee Stock Option Plan of the Company
    11.1  Statement re:  Computation of Earnings Per Share
    27.1  Financial Data Schedule (for EDGAR filings only)
    99.1  Commitment letter for revolving credit facility dated as of July
          21, 1997 between the Company and Morgan Stanley Senior Funding, Inc.

(b)  Reports on Form 8-K

     The Company filed a report on Form 8-K dated April 11, 1997, announcing
the completion of the Merger.

                                       14
<PAGE>
 
                                   SIGNATURES
                                        
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 13, 1997.

                         EXTENDED STAY AMERICA, INC.

                           /s/  Robert A. Brannon
                           ----------------------------------------------------
                                Robert A. Brannon
                                Senior Vice President, Chief Financial Officer,
                                Secretary, and Treasurer
                                (Principal Financial Officer)
 
 
                           /s/  Gregory R. Moxley
                           -----------------------------------------------------
                                Gregory R. Moxley
                                Vice President Finance
                                (Principal Accounting Officer)
            
                                      15