<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

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

                   For the Second Quarter Ended July 15, 2001
                          Commission File No. 0-19840

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

                                 SHOLODGE, INC.
             (Exact name of registrant as specified in its charter)

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

            TENNESSEE                                          62-1015641
  (State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                         Identification Number)

130 MAPLE DRIVE NORTH, HENDERSONVILLE, TENNESSEE                  37075
    (address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code            (615) 264-8000

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

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 as 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 [ ]

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.

         As of August 20, 2001, there were 5,534,278 shares of ShoLodge, Inc.
         common stock outstanding.



<PAGE>   2

                         SHOLODGE, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)



<TABLE>
<CAPTION>
                                                                      JULY 15,        DECEMBER 31,
                                                                        2001             2000(1)
                                                                     (UNAUDITED)
<S>                                                                 <C>              <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                        $   5,265,355    $   5,339,689
   Restricted cash                                                        200,000          200,000
   Accounts receivable-trade, net                                       2,693,372        2,635,447
   Construction contracts                                               1,835,556        2,405,629
   Costs and estimated earnings in excess of billings on
     construction contracts                                             2,220,846           42,844
   Income taxes receivable                                              4,286,463        4,750,074
   Prepaid expenses                                                       384,486          311,513
   Notes receivable, net                                                1,575,222          905,703
   Other current assets                                                   127,725          146,850
                                                              ------------------------------------
               Total current assets                                    18,589,025       16,737,749

NOTES RECEIVABLE, NET                                                  68,677,011       62,885,696
RESTRICTED CASH                                                         8,855,076       14,193,534
PROPERTY AND EQUIPMENT                                                112,739,182      114,361,649
   Less accumulated depreciation and amortization                     (21,413,081)     (23,526,651)
                                                              ------------------------------------
                                                                       91,326,101       90,834,998

LAND UNDER DEVELOPMENT OR HELD FOR SALE                                 8,871,635        8,231,714

DEFERRED CHARGES, NET                                                   6,300,945        6,721,247

INTANGIBLE ASSETS, NET                                                  2,855,759        2,949,008

OTHER ASSETS                                                            1,832,669        2,077,142
                                                              ------------------------------------
   TOTAL ASSETS                                                     $ 207,308,221    $ 204,631,088
                                                              ====================================
</TABLE>


(1)   Derived from fiscal year ended December 31, 2000 audited financial
      statements. See notes to consolidated financial statements.




<PAGE>   3

                         SHOLODGE, INC. AND SUBSIDIARIES
               CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)


<TABLE>
<CAPTION>
                                                                      JULY 15,        DECEMBER 31,
                                                                        2001             2000(1)
                                                                     (UNAUDITED)
<S>                                                                 <C>              <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                            $   9,422,519    $   7,518,321
   Taxes payable other than on income                                     564,547          384,352
   Current portion of long-term debt
      and capitalized lease obligations                                   697,567          870,636
                                                                   -------------------------------
               Total current liabilities                               10,684,633        8,773,309

LONG-TERM DEBT AND CAPITALIZED LEASE
    OBLIGATIONS, LESS CURRENT PORTION                                  92,904,087       94,169,013

DEFERRED INCOME TAXES                                                   4,290,423        4,290,423

DEFERRED GAIN ON SALE/LEASEBACK                                         4,129,962        4,129,962

DEFERRED CREDITS                                                        2,651,240        2,218,519

MINORITY INTERESTS IN EQUITY OF
   CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS                             760,249          728,222
                                                                   -------------------------------
   TOTAL LIABILITIES                                                  115,420,594      114,309,448
                                                                   -------------------------------
SHAREHOLDERS' EQUITY:
   Preferred stock (no par value; 1,000,000 shares authorized;
      no shares issued)                                                        --               --
   Series A redeemable nonparticipating stock
      (no par value; 1,000 shares authorized, no
        shares outstanding)                                                    --               --
   Common stock (no par value; 20,000,000 shares
      authorized,  5,534,278 and 5,544,211 shares
      issued and outstanding as of July 15, 2001
      and  December 31, 2000, respectively)                                 1,000            1,000
  Additional paid-in capital                                           25,375,001       25,425,175
  Retained earnings                                                    67,728,940       66,089,984
  Unrealized gain on securities available for sale (net of tax)            85,389           53,231
  Less notes receivable from officer, net of discount of $228,546
      and $283,499, respectively                                       (1,302,703)      (1,247,750)
                                                                   -------------------------------
      TOTAL SHAREHOLDERS' EQUITY                                       91,887,627       90,321,640
                                                                   -------------------------------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $ 207,308,221    $ 204,631,088
                                                                   ===============================
</TABLE>




(1)   Derived from fiscal year ended December 31, 2000 audited financial
      statements. See notes to consolidated financial statements.


<PAGE>   4

                         SHOLODGE, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
         FOR THE TWENTY-EIGHT WEEKS ENDED JULY 15, 2001 AND JULY 9, 2000



<TABLE>
<CAPTION>
                                                                       12 WEEKS ENDED                 28 WEEKS ENDED
                                                                   JULY 15,        JULY 9,         JULY 15,        JULY 9,
                                                                     2001            2000            2001            2000
                                                                --------------------------------------------------------------
<S>                                                              <C>             <C>             <C>             <C>
REVENUES:
   Hotel                                                         $  3,504,134    $ 17,603,898    $  7,851,966    $ 39,805,704
   Franchising and management                                       1,107,043         935,003       1,879,957       1,832,314
   Construction and development                                     5,330,206       2,930,034      10,157,385       7,062,805
   Rent  income                                                       796,276         118,821       1,899,980         260,174
   Other income                                                       114,763           5,617         125,841          21,957
                                                                --------------------------------------------------------------
            Total revenues                                         10,852,422      21,593,373      21,915,129      48,982,954

COSTS AND EXPENSES:
   Hotel                                                            2,539,591      13,099,115       5,910,541      28,786,421
   Franchising and management                                         444,091         565,928         931,656       1,384,111
   Construction and development                                     5,101,737       3,155,874       9,421,466       7,178,996
   Rent expense, net                                                  151,306       4,672,679         309,849      10,038,424
   General and administrative                                       1,351,351       1,399,930       3,092,782       2,802,193
   Depreciation and amortization                                    1,051,440       1,310,440       2,578,721       3,417,215
                                                                --------------------------------------------------------------
            Total expenses                                         10,639,516      24,203,966      22,245,015      53,607,360

Operating profit (loss)                                               212,906      (2,610,593)       (329,886)     (4,624,406)

   Gain on sale of property and leasehold interests                    72,674       4,381,795       3,679,391       4,680,819
   Interest expense                                                (1,845,272)     (2,517,466)     (4,310,656)     (6,136,051)
   Interest income                                                  1,642,000       1,471,683       3,732,969       3,343,671
                                                                --------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES, MINORITY
  INTERESTS AND EXTRAORDINARY GAIN                                     82,308         725,419       2,771,818      (2,735,967)

INCOME TAXES                                                         (120,000)       (367,000)     (1,260,000)        830,000

MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED
   SUBSIDIARIES & PARTNERSHIPS                                        (14,417)         (7,949)        (32,027)        (26,878)
                                                                --------------------------------------------------------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM                             (52,109)        350,470       1,479,791      (1,932,845)

EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF DEBT
   (net of related tax effect of $64,000, $97,000,
   $1,395,000 and $1,555,000
   for 12 weeks and 28 weeks 2001 and 2000, respectively)             105,400       2,286,214         159,165       2,537,221
                                                                --------------------------------------------------------------
NET EARNINGS                                                     $     53,291    $  2,636,684    $  1,638,956    $    604,376
                                                                ==============================================================
EARNINGS (LOSS) PER COMMON SHARE

        Basic:
          Earnings (loss) per share from continuing operations   $      (0.01)   $       0.07    $       0.27    $      (0.36)
          Extraordinary gain, net of tax effect                  $       0.02    $       0.43    $       0.03    $       0.47
                                                                --------------------------------------------------------------
          Net earnings                                           $       0.01    $       0.50    $       0.30    $       0.11
                                                                ==============================================================
        Diluted:
          Earnings (loss) per share from continuing operations   $      (0.01)   $       0.07    $       0.26    $      (0.36)
          Extraordinary gain, net of tax effect                  $       0.02    $       0.43    $       0.03    $       0.47
                                                                --------------------------------------------------------------
          Net earnings                                           $       0.01    $       0.50    $       0.29    $       0.11
                                                                ==============================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
        Basic                                                       5,534,278       5,318,268       5,538,900       5,325,393
        Diluted                                                     5,610,791       5,321,614       5,606,156       5,375,852
                                                                --------------------------------------------------------------
</TABLE>



See notes to consolidated financial statements.





<PAGE>   5

                        SHOLODGE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
         FOR THE TWENTY-EIGHT WEEKS ENDED JULY 15, 2001 AND JULY 9, 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             28 WEEKS ENDED
                                                                        JULY 15,         JULY 9,
                                                                          2001            2000
                                                                     -----------------------------
<S>                                                                    <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEMS                             $ 1,479,791    $ (1,932,845)
   ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
          DEPRECIATION AND AMORTIZATION                                  2,578,721       3,417,215
          AMORTIZATION OF DEFERRED CHARGES RECORDED
               AS INTEREST EXPENSE                                         348,364         408,185
          RECOGNITION OF PREVIOUSLY DEFERRED GAINS                        (205,904)     (2,526,455)
          GAIN ON SALE OF PROPERTY AND OTHER ASSETS                     (3,679,391)     (4,680,819)
          INCREASE IN MINORITY INTEREST IN EQUITY
               OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS                32,027          26,878
          COMPENSATION EXPENSE                                                  --         151,955
          CHANGES IN ASSETS AND LIABILITIES:
               INCREASE IN TRADE RECEIVABLES                               (57,925)       (165,921)
               DECREASE IN CONSTRUCTION CONTRACT RECEIVABLES               570,073       7,245,309
               INCREASE IN ESTIMATED EARNINGS IN EXCESS OF BILLINGS
                    ON CONSTRUCTION CONTRACTS                           (2,178,002)     (5,961,939)
               INCREASE IN INCOME AND OTHER TAXES                          527,043         197,530
               (INCREASE) DECREASE IN PREPAID EXPENSES                     (72,973)        117,705
               DECREASE IN OTHER ASSETS                                    228,217         257,717
          INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES              1,904,198         975,423
                                                                     -----------------------------
             NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES         1,474,239      (2,470,062)

CASH FLOWS FROM INVESTING ACTIVITIES:
          DECREASE (INCREASE) IN RESTRICTED CASH                         5,338,458     (12,536,302)
          PAYMENTS RECEIVED ON NOTES RECEIVABLE                            221,673          75,000
          CAPITAL EXPENDITURES                                          (8,589,245)     (2,016,390)
          PROCEEDS FROM SALE OF PROPERTY AND LEASEHOLD INTERESTS         2,788,407      38,560,676
          PROCEEDS FROM SALE OF LEASEHOLD INTERESTS, NET OF EXPENSES            --      13,832,482
          INCREASE OF DEPOSITS ON SALE/LEASEBACK OF HOTELS                      --      (4,295,000)
                                                                     -----------------------------
             NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES          (240,707)     33,620,466

CASH FLOWS FROM FINANCING ACTIVITIES:
          PAYMENTS FOR DEFERRED LOAN COSTS                                 (98,453)       (159,008)
          PROCEEDS FROM LONG-TERM DEBT                                   1,500,000      12,800,500
          PAYMENTS ON LONG-TERM DEBT                                    (2,659,239)    (28,225,407)
          PAYMENTS ON CAPITALIZED LEASE OBLIGATIONS                             --        (189,590)
          DISTRIBUTIONS TO MINORITY INTERESTS                                   --        (201,834)
          EXERCISE OF STOCK OPTIONS                                          4,001           4,001
          PURCHASE OF TREASURY STOCK                                       (54,175)       (349,336)
                                                                     -----------------------------
             NET CASH USED IN FINANCING ACTIVITIES                      (1,307,866)    (16,320,674)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                       (74,334)     14,829,730

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                          5,339,689       3,386,937
                                                                     -----------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD                              $ 5,265,355    $ 18,216,667
                                                                     =============================
</TABLE>


See notes to consolidated financial statements.


<PAGE>   6

                         SHOLODGE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


A.       BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
         have been prepared in accordance with generally accepted accounting
         principles for interim financial information and with the instructions
         to Form 10-Q and Article 10 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.

         In Management's opinion, the information and amounts furnished in this
         report reflect all adjustments which are necessary for the fair
         presentation of the financial position and results of operations for
         the periods presented. All adjustments are of a normal and recurring
         nature. These financial statements should be read in conjunction with
         the Company's Annual Report on Form 10-K for the fiscal year ended
         December 31, 2000.

         The fiscal year consists of a 52/53 week year ending the last Sunday of
         the year. The Company's fiscal quarters have 16, 12, 12, and 12 weeks
         in first, second, third and fourth quarters, respectively, in each
         fiscal year. When the 53rd week occurs in a fiscal year, it is added to
         the fourth fiscal quarter, making it 13 weeks in length.

         The Company has historically reported lower earnings in the first and
         fourth quarters of the year due to the seasonality of the Company's
         business. The results of operations for the quarters and year-to-date
         periods ended July 15, 2001 and July 9, 2000 are not necessarily
         indicative of the operating results for the entire year.

B.       SALE OF PROPERTIES

         The Company sold two hotels and three restaurants in the first quarter
         ended April 22, 2001, resulting in the recognition of $3,606,717 in
         gains on sale of properties, and the deferral of an additional $717,941
         to be recognized in future periods under the installment method of
         accounting. The restaurant properties were leased to third parties
         prior to the sales. The deferred gain in the amount of $14,308 was
         recognized under the installment method in the second quarter. In the
         second quarter ended July 15, 2001, the Company sold a building, two
         parking lots, and a parcel of undeveloped land for a combination of
         cash and seller financing, recognizing a net gain of $58,366 on these
         miscellaneous sales of real estate in the second quarter.


<PAGE>   7

C.       EARNINGS PER SHARE

         Earnings per share was computed by dividing net income by the weighted
         average number of common shares outstanding. The following table
         reconciles earnings and weighted average shares used in the earnings
         per share calculations for the fiscal quarters and fiscal year-to-date
         periods ended July 15, 2001, and July 9, 2000:

<TABLE>
<CAPTION>
                                                           12 WEEKS ENDED                28 WEEKS ENDED
                                                     --------------------------      ----------------------
                                                       July 15,        July 9,      July 15,       July 9,
                                                         2001           2000          2001          2000
<S>                                                  <C>            <C>            <C>          <C>
         BASIC:
            EARNINGS (LOSS) BEFORE
                 EXTRAORDINARY ITEMS                 $   (52,109)   $   350,470    $ 1,479,791   $(1,932,845)
            EXTRAORDINARY GAIN                           105,400      2,286,214        159,165     2,537,221
                                                     -----------    -----------    -----------   -----------
            NET EARNINGS  APPLICABLE TO
                 COMMON STOCK                        $    53,291    $ 2,636,684    $ 1,638,956   $   604,376
                                                     ===========    ===========    ===========   ===========
         SHARES:
              WEIGHTED AVERAGE COMMON
                   SHARES OUTSTANDING                  5,534,278      5,318,268      5,538,900     5,325,393
                                                     ===========    ===========    ===========   ===========
         BASIC EARNINGS PER SHARE:
              BEFORE EXTRAORDINARY ITEMS             $     (0.01)   $      0.07    $      0.27   $     (0.36)
              EXTRAORDINARY GAIN                            0.02           0.43           0.03          0.47
                                                     -----------    -----------    -----------   -----------
              NET EARNINGS                           $      0.01    $      0.50    $      0.30   $      0.11
                                                     ===========    ===========    ===========   ===========
         DILUTED:
              EARNINGS (LOSS) BEFORE
                  EXTRAORDINARY  ITEMS               $   (52,109)   $   350,470    $ 1,479,791   $(1,932,845)
              EXTRAORDINARY GAIN                         105,400      2,286,214        159,165     2,537,221
                                                     -----------    -----------    -----------   -----------
              NET EARNINGS  APPLICABLE TO
                 COMMON STOCK                             53,291      2,636,684      1,638,956       604,376
              DILUTIVE EFFECT OF 7.5%
                  CONVERTIBLE DEBENTURES                      --             --             --            --
                                                     -----------    -----------    -----------   -----------
              NUMERATOR FOR DILUTED
                   EARNINGS PER SHARE                $    53,291    $ 2,636,684    $ 1,638,956   $   604,376
                                                     ===========    ===========    ===========   ===========
         SHARES:
              WEIGHTED AVERAGE COMMON
                  SHARES OUTSTANDING                   5,534,278      5,318,268      5,538,900     5,325,393
              EFFECT OF DILUTIVE
                  SECURITIES (OPTIONS)                    76,513          3,346         67,257        50,459
              EFFECT OF DILUTIVE SECURITIES
                  (7.5% CONVERTIBLE  DEBENTURES)              --             --             --            --
                                                     -----------    -----------    -----------   -----------
              WEIGHTED AVERAGE COMMON
                 AND COMMON EQUIVALENT
                 SHARES OUTSTANDING                    5,610,791      5,321,614      5,606,156     5,375,852
                                                     ===========    ===========    ===========   ===========
          DILUTED EARNINGS PER SHARE:
              BEFORE EXTRAORDINARY ITEMS             $     (0.01)   $      0.07    $      0.26   $     (0.36)
              EXTRAORDINARY GAIN                            0.02           0.43           0.03          0.47
                                                     -----------    -----------    -----------   -----------
              NET EARNINGS                           $      0.01    $      0.50    $      0.29   $      0.11
                                                     ===========    ===========    ===========   ===========
</TABLE>




<PAGE>   8

D.       OPERATING SEGMENT INFORMATION

         The Company's significant operating segments are hotel operations,
         franchising and management, and construction and development. None of
         the Company's segments conduct foreign operations. Operating profit
         includes the operating revenues and expenses directly identifiable with
         the operating segment. Identifiable assets are those used directly in
         the operations of each segment. A summary of the Company's operations
         by segment follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                  12 WEEKS ENDED            28 WEEKS ENDED
                                                               ----------------------    ---------------------
                                                                July 15,      July 9,     July 15,     July 9,
                                                                  2001         2000         2001         2000
<S>                                                            <C>          <C>          <C>          <C>
         Revenues:
            Hotel revenues from external customers             $   4,576    $  17,499    $  10,214    $  40,088
            Franchising and management                             1,457        2,123        2,665        4,505
            Construction and development                           8,739        3,225       16,679        8,696
            Elimination of intersegment revenue franchising
              management, construction and development            (3,920)      (1,254)      (7,643)      (4,306)
                                                               ---------    ---------    ---------    ---------
                  Total revenues                               $  10,852    $  21,593    $  21,915    $  48,983
                                                               =========    =========    =========    =========
         Operating profit (loss):
               Hotel                                           $   2,083    $  (1,309)   $   1,614    $  (1,817)
               Franchising and management                         (2,147)      (1,125)      (2,776)      (2,770)
               Construction and development                          277         (177)         832          (37)
                                                               ---------    ---------    ---------    ---------
                   Total operating profit (loss)               $     213    $  (2,611)   $     330    $  (4,624)
                                                               =========    =========    =========    =========
         Capital expenditures:
               Hotel                                           $   3,782    $     551    $   7,062    $   1,842
               Franchising and management                            181           25        1,527          173
               Construction and development                           --            1           --            1
                                                               ---------    ---------    ---------    ---------
                   Total capital expenditures                  $   3,963    $     577    $   8,589    $   2,016
                                                               =========    =========    =========    =========
         Depreciation and amortization:
               Hotel                                           $     787    $   1,030    $   1,966    $   2,766
               Franchising and management                            248          274          583          637
               Construction and development                           16            6           30           14
                                                               ---------    ---------    ---------    ---------
                   Total depreciation and amortization         $   1,051    $   1,310    $   2,579    $   3,417
                                                               =========    =========    =========    =========

                                                                                           As of        As of
                                                                                          July 15,   December 31,
                                                                                            2001         2000
         Total assets:
               Hotel                                                                     $ 138,350    $ 138,421
               Franchising and management                                                   64,275       63,351
               Construction and development                                                  4,683        2,859
                                                                                         ---------    ---------
                   Total assets                                                          $ 207,308    $ 204,631
                                                                                         =========    =========
</TABLE>


<PAGE>   9

E.       CONTINGENCIES

         The Company is a party to legal proceedings incidental to its business.
         In the opinion of management, any ultimate liability with respect to
         these actions will not materially affect the consolidated financial
         position or results of operations of the Company.

         During September 2000, the Internal Revenue Service (the "Service")
         issued a Revenue Agent's Report to the Company asserting income tax
         deficiencies and additions to tax relating to the tax year ended
         December 28, 1997. The Company filed a protest to the Service's
         asserted deficiencies and additions to tax. The amounts of the income
         tax deficiencies and additions to tax asserted does not include
         interest which accrues from the dates the taxes were due until the date
         of the payment. The protest is currently being reviewed by the Service.
         The asserted deficiencies are related solely to the timing of taxable
         income between fiscal 1997 and the fiscal year ended December 31, 2000,
         in which year the Company provided for and paid estimated taxes
         thereon. The Company believes that any ultimate deficiency will be
         limited to interest on the tax and would be substantially less than the
         amounts asserted by the Service. The Company also believes it has
         adequately provided in the accompanying Consolidated Balance Sheets for
         any additional taxes, additions to tax, penalties, and statutory
         interest that may be due for all tax years. There was no significant
         change in the status of this issue in the first two fiscal quarters of
         2001.

F.       NEW ACCOUNTING PRONOUNCEMENTS

         Financial Accounting Standards Board (FASB) Statement No. 133,
         Accounting for Derivative Instruments and Hedging Activities, was
         adopted by the Company effective January 1, 2001. The adoption had no
         effect on the Company's financial position or operating results.


<PAGE>   10

                         ShoLodge, Inc. and Subsidiaries
                Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

OVERVIEW

         The following discussion should be read in conjunction with the
Company's condensed consolidated financial statements and notes thereto
appearing elsewhere in this quarterly report.

         The Company is an operator and the exclusive franchisor of Shoney's
Inns. As of July 15, 2001, the Shoney's Inn lodging system consists of 74
Shoney's Inns containing 6,903 rooms of which 12 containing 1,377 rooms are
owned and operated by the Company. Shoney's Inns are currently located in 21
states with a concentration in the Southeast.

         Shoney's Inns operate in the upper economy limited-service segment and
are designed to appeal to both business and leisure travelers, with rooms
usually priced between $40 and $65 per night. The typical Shoney's Inn includes
60 to 120 rooms and, in most cases, meeting rooms. Although Shoney's Inns do not
offer full food service, most offer continental breakfast and most of the
Shoney's Inns are located adjacent or in close proximity to Shoney's
restaurants. Management believes that its strategy of locating most of its
Shoney's Inns in close proximity to free-standing Shoney's restaurants has given
it a competitive advantage over many other limited-service lodging chains by
offering guest services approximating those of full-service facilities without
the additional capital expenditures, operating costs or higher room rates.

         The Company's operations have been supplemented by contract revenues
from construction and development of hotels for third parties. Revenues from
these activities have varied widely from period to period, depending upon
whether the Company's construction and development activities were primarily
focused on its own facilities or on outside projects. Construction revenues are
recognized on the percentage of completion basis.

         The Company has historically reported lower earnings in the first and
fourth quarters of the year due to the seasonality of the Company's business.
The results of operations for the quarters and year-to-date periods ended July
15, 2001 and July 9, 2000 are not necessarily indicative of the operating
results for the entire year.


<PAGE>   11

RESULTS OF OPERATIONS

For the Fiscal Quarters and Fiscal Year-to-date Periods Ended July 15, 2001 and
July 9, 2000

         Total operating revenues for the quarter ended July 15, 2001, were
$10.9 million, or 49.7% less than the total operating revenues of $21.6 million
reported for the second quarter of 2000. For the fiscal year-to-date period
ended July 15, 2001, total operating revenues were $21.9 million, or 55.3% less
than the total operating revenues of $49.0 million for the comparable period of
2000.

         Revenues from hotel operations in the second fiscal quarter of 2001
decreased by $14.1 million, or 80.1%, from the $17.6 million reported for the
same period last year. For the 12 same hotels opened for all of both quarterly
periods, a decrease of 3.6% in average daily room rates, from $52.93 in second
quarter 2000 to $51.03 in second quarter 2001, and an increase in average
occupancy rates on these hotels from 48.4% to 58.3% this year, were the primary
causes of an increase in same hotel revenues of 17.3% from $3.0 million in
second quarter 2000 to $3.5 million in second quarter 2001. The Company sold 28
hotels (27 Sumner Suites hotels and one Shoney's Inn) in the second quarter of
2000, and sold an additional two Shoney's Inns in the first quarter of 2001.
These thirty hotels sold since April 16, 2000, contributed $14.6 million to
hotel operating revenues in the second quarter of last year.

         Revenues from hotel operations in the first two fiscal quarters of 2001
decreased by $32.0 million, or 80.3%, from the $39.8 million reported for the
same period last year. For the 12 same hotels opened for all of both
year-to-date periods, a decrease of 1.6% in average daily room rates, from
$51.85 in 2000 to $51.01 in 2001, and an increase in average occupancy rates on
these hotels from 45.3% to 51.4% this year, were the primary causes of an
increase in same hotel revenues of 13.3% from $6.4 million in 2000 to $7.2
million in 2001. The thirty hotels sold in 2000 and 2001 contributed $638,000 to
hotel operating revenues in the first two quarters of this year (from the two
hotels sold in April of 2001), compared with $33.4 million in the first two
quarters of last year.

         The Company owns and operates Shoney's Inns. RevPAR (revenue per
available room) for all Company-owned Shoney's Inns increased by 14.9%, from
$25.88 in second quarter 2000 to $29.74 in second quarter 2001. The 12 Shoney's
Inns same-hotels' RevPAR increased by 16.0%, from $25.63 in second quarter 2000
to $29.74 in second quarter 2001. For the first two quarters of this year, the
RevPAR for all Company-owned Shoney's Inns increased by 10.2%, from $23.76 in
2000 to $26.18 in 2001; the 12 Shoney's Inns same-hotels' RevPAR during this
same period increased by 11.6%, from $23.47 in 2000 to $26.20 this year.

         Franchising and management revenues increased by $172,000, or 18.4%, in
second quarter 2001 from second quarter 2000. Initial franchise fees decreased
by $30,000, franchise termination fees decreased by $203,000, and royalty and
reservation


<PAGE>   12

fees decreased by $29,000 from second quarter of last year. Initial franchise
fee revenue varies from quarter to quarter depending on the level of franchise
sales activities. Franchising and management revenues declined by $48,000, or
2.6%, in the first two quarters of 2001 from the first two quarters of 2000.
Initial franchise fees decreased by $12,000, franchise termination fees
decreased by $291,000, and royalty and reservation fees decreased by $71,000
from the first two quarters of last year. Management fees increased by $434,000
and $422,000 in the second quarter of this year and the first two quarters of
this year, respectively, over the comparable period in 2000, due primarily to 17
new hotel management contracts which became effective April 20, 2001.

         Revenues from construction and development activities were $5.3 million
in the second quarter of 2001 on six third party construction contracts in
progress versus $2.9 million in the second quarter of 2000 on four third party
construction contracts in progress. For the first two quarters of this year,
revenues from construction and development activities were $10.2 million on six
third party construction contracts in progress versus $7.1 million in the first
two quarters of 2000 on seven third party construction contracts in progress.

         Rent income in the second quarter of 2001 increased by $677,000, to
$796,000, from $119,000 in the second quarter of 2000. Rent income in the first
two quarters of 2001 increased by $1.6 million, to $1.9 million, from $260,000
in the first two quarters of 2000. This increase was due entirely to the lease
of three hotels in July of 2000, in conjunction with the Company's sale of its
operating interests in 27 Sumner Suites hotels, which have been re-flagged as
AmeriSuites hotels and are being operated by Prime Hospitality Corp.

         Operating expenses from hotel operations for the second quarter of 2001
decreased by $10.6 million, or 80.6%, from $13.1 million in the second quarter
of 2000, due to the sale of 28 hotels in mid-2000 and two hotels in the first
quarter of this year. Hotel operating expenses on the 12 same-hotels increased
by $281,000, or 12.5%, in the second quarter of 2001 compared to the second
quarter of 2000. Hotel operating expenses as a percentage of hotel operating
revenues for this activity decreased from 74.4% in the second quarter of 2000 to
72.5% in the second quarter of 2001; hotel operating expenses as a percentage of
hotel operating revenues on the 12 same-hotels decreased from 75.0% in the
second quarter of 2000 to 71.9% in the second quarter of 2001. Increases in
second quarter hotel operating expenses on same-hotels were primarily in the
areas of payroll related costs, utilities, property taxes and insurance.

         Operating expenses from hotel operations for the first two quarters of
2001 decreased by $22.9 million, or 79.5%, from $28.8 million in the first two
quarters of 2000, due to the sale of the 28 hotels in mid-2000 and two hotels in
the first quarter of this year. Hotel operating expenses on the 12 same-hotels
increased by $298,000, or 5.8%, in the first two quarters of 2001 compared to
the first two quarters of 2000. The hotel operating expenses as a percentage of
hotel operating revenues for this activity increased from 72.3% in the first two
quarters of 2000 to 75.3% in the first two quarters


<PAGE>   13

of 2001; hotel operating expenses as a percentage of hotel operating revenues on
the 12 same-hotels decreased from 80.6% in the first two quarters of 2000 to
75.2% in the first two quarters of 2001. Increases in year-to-date hotel
operating expenses on same-hotels were primarily in the areas of payroll related
costs and utilities.

         Franchising and management operating expenses decreased by $122,000, or
21.5%, from the second quarter of 2000 to the second quarter of 2001, and by
$452,000, or 32.7%, from the first two quarters of 2000 to the first two
quarters of 2001. The decreases were primarily in the areas of (1) reservation
center expenses and payroll and related benefits and (2) franchise
administrative expenses; particularly, advertising, telephone expense, provision
for bad debts, postage and freight, dues and subscriptions, and hotel inspection
expenses. The reduction in reservation center expenses was due primarily to the
Company's sale of the 27 Sumner Suites hotels in 2000, and the absence of
reservation services provided for those hotels since November of last year.

         Construction and development costs in the second quarter of 2001 were
$5.1 million on the six third party construction contracts in progress versus
$3.2 million in the second quarter of 2000 on the four third party construction
contracts in progress at that time. Construction and development costs in the
first two quarters of this year were $9.4 million on the six third party
construction contracts in progress versus $7.2 million on the seven third party
construction contracts in progress at that time.

         Rent expense decreased by $4.5 million in the second quarter this year
from last year's second quarter, and by $9.7 million in the first two quarters
of this year from the first two quarters of 2000, all of which was due to the
sale of 28 hotels in mid-2000 which incurred rent expense of $4.5 million and
$9.7 million, respectively, in the second quarter and first two quarters of last
year, versus none this year.

         General and administrative expenses decreased by $49,000, or 3.5%, from
the second quarter 2000, and increased by $291,000, or 10.4%, from the first two
quarters of 2000. These year-to-date increases were due primarily to increased
professional fees, travel expenses and salaries and related payroll costs.

         Depreciation and amortization expense decreased by $259,000, or 19.8%,
from the second quarter of 2000, and by $838,000, or 24.5%, from the first two
quarters of 2000 due to the sale of 30 hotels in 2000 and the first quarter of
2001.

         The gain recognized on sale of property in the second quarter of 2001
totaled $73,000, and in the first two quarters of 2001 totaled $3.7 million, of
which $3.6 million was from the Company's sale of one hotel and three
restaurants. Another hotel was sold near the end of the first quarter, but the
gain (approximately $543,000) was deferred and is being recognized under the
installment method of accounting until full accrual accounting is warranted. A
portion of the gain (approximately $175,000) on the sale of two of the
restaurants was also deferred and is being recognized under the installment
method of accounting. Approximately $14,000 of the deferred gains on the sale of
the


<PAGE>   14

hotel and two restaurants was recognized in the second quarter. Additionally, a
building (including parking lot) and a parcel of undeveloped land were sold in
the second quarter of 2001 for a net gain of $58,000. The gain recognized on the
sale of property and leasehold interests in the second quarter of 2000 totaled
$4.4 million, and included a gain of $3.6 million recognized on the sale of the
Company's interest in 24 Sumner Suites hotels which had been previously sold and
leased back, at which time the gain had been deferred and was being amortized
over the lease term. Additionally, a Shoney's Inn was sold in the second quarter
of 2000 at a gain of $755,000. In addition to these second quarter 2000
transactions, the first two quarters of 2000 included a $299,000 gain on the
sale of property in the first quarter of 2000 which represented the adjustment
of deferred credits due to the revision of the estimated amounts needed to fund
reserves related to the 16 hotels sold in the third quarter of 1998, of which
the recognition of the balance of the gain was recognized in 1998 and 1999.

         Interest expense in the second quarter of 2001 decreased by $672,000,
or 26.7%, while interest income increased by $170,000, or 11.6%, from the second
quarter of 2000. Interest expense in the first two quarters of 2001 decreased by
$1.8 million, or 29.7%, while interest income for this period increased by
$389,000, or 11.6%, from the first two quarters of 2000. The reduction of
$843,000 in net interest expense in the second quarter and of $2.2 million in
net interest expense in the first two quarters was due to a paydown of $7.5
million of the Company's outstanding debt using a portion of the $38.4 million
gross proceeds of the sale lease-back of four hotels on May 11 of last year and
to the interest income earned from the temporary investment of the remaining
proceeds from that transaction in interest bearing instruments. Interest income
also increased due to seller financing of a portion of the sales price of three
Shoney's Inns sold to franchisees in the second quarter of 2000 and the first
quarter of 2001. The Company has also continued to repurchase its public debt in
the open market and in privately negotiated transactions, reducing its interest
expense (see Liquidity and Capital Resources discussion below).

LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash flows provided by operating activities were $1.5
million in the first two quarters of 2001, compared with $2.5 million used in
operating activities in the first two quarters of 2000.

         The Company's cash flows used in investing activities were $241,000 in
the first two quarters of 2001, compared with $33.6 million provided by
investing activities for the comparable period in 2000. The Company's capital
expenditures are principally for the construction and acquisition of new lodging
facilities and the purchase of equipment and leasehold improvements. Capital
expenditures for such purposes were $8.6 million in the first two quarters of
2001 and $2.0 million in the first two quarters of 2000. Proceeds from the sale
of property and leasehold interests were $2.8 million in the first two quarters
of 2001 versus $38.6 million for the comparable period in 2000. In the first two
quarters of 2001, the Company sold one restaurant, one building and one land
parcel


<PAGE>   15

for cash and sold two additional restaurants, two hotels, and one land parcel
for a combination of cash and notes. In the second quarter of 2000, the Company
sold and leased back four hotels and sold a fourth hotel for a combination of
cash and a note.

         Net cash used in financing activities was $1.3 million in the first two
quarters of 2001 compared with $16.3 million provided by financing activities in
the first two quarters of 2000. Repayments, net of borrowings, on long-term debt
and capitalized lease obligations were $1.2 million in the first two quarters of
2001 versus $15.6 million in the first two quarters of 2000. The repayments in
the first two quarters of 2001 and the first two quarters of 2000 include
$808,000 and $15.5 million, respectively, of long-term debt repurchased in the
open market or in privately negotiated transactions. In the first two quarters
of 2001, the Company repurchased 11,000 shares of its common stock for $54,000;
in the first two quarters of 2000, the Company repurchased 80,000 shares of its
common stock for $349,000 pursuant to a plan to repurchase up to $20.0 million
of the Company's outstanding common stock.

         The Company established a three-year credit facility with a bank group
effective August 27, 1999. The credit facility is for an initial amount of $30.0
million (a $10.0 million term loan and a $20.0 million revolving line of
credit), secured by a pledge of certain promissory notes payable to the Company
received in connection with the sale of 16 of the Company's lodging facilities
in the third quarter of 1998. The borrowing base is the lower of (a) 85% of the
outstanding principal amount of the pledged notes, (b) 65% of the appraised
market value of the underlying real property collateral securing the pledged
notes, or (c) $30.0 million. The interest rate is at the lender's base rate plus
50 basis points and the Company is to pay commitment fees on the unused portion
of the facility at .50% per annum. The credit facility also contains covenants
which, inter alia, limit or prohibit the incurring of certain additional
indebtedness in excess of a specified debt to total capital ratio, prohibit
additional liens on the collateral, restrict mergers and the payment of
dividends and restrict the Company's ability to place liens on unencumbered
assets. The credit facility contains financial covenants as to the Company's
minimum net worth. As of July 15, 2001, the Company had $10.0 million in
borrowings outstanding under this credit facility, consisting of the three-year
term loan of $10.0 million; additionally, $3.1 million is currently used to
secure the Company's guaranty of a subsidiary's letter of credit.

         The Company also maintains a $1 million unsecured line of credit with
another bank, bearing interest at the lender's prime rate, maturing May 31,
2002. As of July 15, 2001, the Company had no borrowings outstanding under this
credit facility.

         The Company opened no new hotels in the first two quarters of either
2001 or 2000. As of the end of the second fiscal quarter of 2001, two hotels
were under construction which are expected to open in the second half of 2001.
The Company estimates that approximately $8.9 million in capital funds will be
necessary to complete the construction of the two hotels under construction.
These two hotels may be exchanged upon completion for two of the 24 hotels that
are included in the leasehold

<PAGE>   16

interests sold to Prime in July of 2000. The Company escrowed $13.9 million to
finish these two hotels, and as of the end of the second fiscal quarter of 2001
the balance of $8.9 million held in the escrow accounts is estimated to be
sufficient to complete the two hotels. There are no plans to develop or operate
additional hotels for the Company's own account in the near term. This decision
was based on current market conditions, rooms supply in certain areas, capital
availability, and the sale of leasehold interests in 2000.

         The Company's Board of Directors has previously authorized the use of
up to $20.0 million for the repurchase of shares of the Company's common stock.
The purchases, including block purchases, are to be made from time to time in
the open market at prevailing market prices, or in privately negotiated
transactions at the Company's discretion. No time limit has been placed on the
duration of the stock repurchase plan, and the Company may discontinue the plan
at any time. As of the end of the second fiscal quarter of 2001, approximately
3.1 million shares had been repurchased at a cost of $18.5 million.

         The Company is investigating various alternatives to maximize
shareholder value. These alternatives could include, without limitation, the
franchising and operation of Shoney's Inns, a sale of the remaining Shoney's
Inns, negotiating new credit arrangements, developing hotels for other owners,
the repurchase of additional shares of the Company's common stock or outstanding
debt securities, or any combination of these or other strategies. The Company
believes that a combination of cash on hand, the collection of notes receivable,
net cash provided by operations, and borrowings under existing and new revolving
credit facilities or mortgage debt, will be sufficient to fund its scheduled
hotel development, stock repurchase plan, debt repayments and operations for at
least the next twelve months.

MARKET RISK

         There have been no material changes in the Company's exposure to market
risk in the second fiscal quarter ended July 15, 2001.

FORWARD-LOOKING STATEMENT DISCLAIMER

         The statements appearing in this report which are not historical facts
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to risks and uncertainties that could
cause actual results to differ materially from those set forth in the
forward-looking statements, including delays in concluding or the inability to
conclude transactions, the establishment of competing facilities and services,
cancellation of leases or contracts, changes in applicable laws and regulation,
in margins, demand fluctuations, access to debt or equity financing, adverse
uninsured determinations in existing or future litigation or regulatory
proceedings and other risks.


<PAGE>   17

                           PART II - OTHER INFORMATION

Item 1.  On June 25, 2001 the Company filed an arbitration proceeding against
         Prime Hospitality Corporation ("Prime") based on Prime's failure to
         commence use of the Company's reservation services for a fee as agreed
         by Prime in an Agreement for Reservation Services dated July 9, 2000.
         The Company is seeking $20 million in monetary damages. The parties are
         currently in the process of selecting an arbitrator, and there is no
         assurance that the Company will be successful in the proceeding.

         No material developments occurred during the second quarter ended July
         15, 2001 with respect to any other pending litigation.

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

         At the Company's Annual Meeting of Shareholders held on May 25, 2001,
         5,534,278 shares were outstanding and eligible to vote. The
         shareholders considered and voted to reelect the following directors:

<TABLE>
<CAPTION>
                  Name of Nominee                Vote Cast
                  ---------------                ---------
                                            For           Withheld
                                            ---           --------
<S>                                      <C>               <C>
                  Earl H. Sadler         5,450,684         29,895
                  Bob Marlowe            5,450,684         29,895
                  David M. Resha         5,450,684         29,895
</TABLE>

         The names of the directors whose terms of office as directors continued
         after the annual meeting of shareholders are: Leon Moore, Richard L.
         Johnson and Helen L. Moskovitz.

Item 6.  Exhibits and Reports on Form 8-K

         6(a) Exhibits -

                  None

         No reports on Form 8-K were filed by the Company during the fiscal
         quarter ended July 15, 2001.

                                   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.

                                    ShoLodge, Inc.



Date:  August 20, 2001              S/ Leon Moore
                                    --------------------------------------------
                                    Leon Moore
                                    President, Chief Executive Officer,
                                    Principal Executive Officer, Director



Date:  August 20, 2001              S/ Bob Marlowe
                                    --------------------------------------------
                                    Bob Marlowe
                                    Secretary, Treasurer, Chief Accounting
                                    Officer, Principal Accounting Officer,
                                    Chief Financial Officer, Director