UNITED STATES 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 Period Ended March 31, 1999

                                       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 No. 1-11342

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

               DELAWARE                                  52-2093696
               --------                                  ----------
 (State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)

     3445 PEACHTREE ROAD, N.E.,
       SUITE 700, ATLANTA, GA                               30326
     --------------------------                             -----
(Address of principal executive offices)                  (Zip Code)

                                 (404) 364-9400
                                -----------------
              (Registrant's telephone number, including area code)

(Former name, former address and former fiscal year,        NOT APPLICABLE
if changed since last report)                               --------------


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
                            ---         --

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

             CLASS                            OUTSTANDING AS OF MAY 12, 1999
             -----                            ------------------------------
             Common                                     27,992,104






<PAGE>

                         LODGIAN, INC. AND SUBSIDIARIES
              INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                            No.
PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements:
           Condensed Consolidated Balance Sheets as of
              March 31, 1999 and December 31, 1998...........................3

           Condensed Consolidated Statements of Operations
              for the Three Months Ended March 31, 1999 and 1998.............4

           Condensed Consolidated Statements of Stockholders'
              Equity for the Three Months Ended March 31, 1999
              and for the Year Ended December 31, 1998.......................5

           Condensed Consolidated Statements of Cash Flows for
              the Three Months Ended March 31, 1999 and 1998.................6

           Notes to Condensed Consolidated Financial Statements..............7


Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations......................................8


PART II.   OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K.................................13

SIGNATURES .................................................................14


                                      -2-
<PAGE>




PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         LODGIAN, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Share Data)




<TABLE>
<CAPTION>

                                                                        MARCH 31,            DECEMBER 31,
                                                                           1999                   1998
                                                                      ----------------       ----------------
                                                                        (Unaudited)
<S>                                                                   <C>                    <C>
ASSETS
Current assets:
   Cash and cash equivalents ......................................          $ 18,293               $ 19,185
   Cash, restricted ...............................................             6,127                  6,302
   Accounts receivable, net of allowances .........................            28,612                 25,498
   Other current assets ...........................................            26,678                 27,956
                                                                      ----------------       ----------------
Total current assets ..............................................            79,710                 78,941

Property and equipment, net .......................................         1,329,968              1,317,470
Deposits for capital expenditures .................................            16,186                 30,386
Other assets, net .................................................            68,816                 71,124
                                                                      ----------------       ----------------
                                                                           $1,494,680             $1,497,921
                                                                      ================       ================

LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
   Accounts payable ...............................................          $ 56,935               $ 57,253
   Accrued liabilities ............................................            48,988                 50,633
   Current portion of long-term obligations .......................            36,122                 36,134
                                                                      ----------------       ----------------
Total current liabilities .........................................           142,045                144,020

Long-term obligations, less current portion .......................           818,627                816,644

Deferred income taxes .............................................            61,841                 63,469

Commitments and contingencies .....................................                  -                      -

Minority interests:
   Preferred redeemable securities ................................           175,000                175,000
   Other ..........................................................            15,642                 15,021

Stockholders' equity 
   Common Stock, $.01 par value--75,000,000
      shares authorized; 27,981,501 shares and 27,937,057 shares
      issued and outstanding at March 31, 1999 and December 31, 
      1998, respectively ..........................................               278                    278
   Additional paid-in capital .....................................           262,176                261,976
   Retained earnings ..............................................            20,664                 23,106
   Accumulated other comprehensive loss ...........................            (1,593)                (1,593)
                                                                      ----------------       ----------------
Total stockholders' equity ........................................           281,525                283,767
                                                                      ----------------       ----------------
                                                                           $1,494,680             $1,497,921
                                                                      ================       ================
</TABLE>

See accompanying notes.

                                      -3-

<PAGE>



                         LODGIAN, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In Thousands, Except Share Data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED MARCH 31,
                                                               --------------------------------
                                                                   1999              1998
                                                               --------------    --------------
<S>                                                            <C>               <C>
Revenues:
   Rooms......................................................      $ 96,784          $ 55,833
   Food and beverage..........................................        32,070            22,146
   Other......................................................         6,950             4,902
                                                               --------------    --------------
                                                               --------------    --------------
Total revenues................................................       135,804            82,881
                                                               --------------    --------------

Operating expenses:
   Direct:
      Rooms...................................................        26,264            15,509
      Food and beverage.......................................        24,108            17,647
   General and administrative.................................         5,229             2,387
   Depreciation and amortization..............................        13,750             7,207
   Other......................................................        47,840            27,650
                                                               --------------    --------------
Total operating expenses......................................       117,191            70,400
                                                               --------------    --------------

Income from operations........................................        18,613            12,481

Other Income (expenses):
   Interest income and other..................................           348               454
   Interest expense...........................................      (19,128)           (7,846)
Minority interests:
   Preferred redeemable securities............................       (3,159)                 -
   Other......................................................         (744)              (94)
                                                               --------------    --------------
(Loss) income before income tax...............................       (4,070)             4,995
Benefit (provision) for income taxes..........................         1,628           (1,999)
                                                               --------------    --------------
Net (loss) income.............................................     $ (2,442)           $ 2,996
                                                               ==============    ==============

(Loss) income per common share: ..............................      $ (0.09)           $  0.14
                                                               ==============    ==============

(Loss) income per common share-assuming dilution..............      $ (0.09)           $  0.14
                                                               ==============    ==============
</TABLE>

See accompanying notes.

                                      -4-

<PAGE>



                         LODGIAN, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (In Thousands, Except Share Data)
                                                  


<TABLE>
<CAPTION>
                                                                                                         ACCUMU-
                                                                                                          LATED
                                                                                                          OTHER          TOTAL
                                                    COMMON STOCK             ADDITIONAL                   COMPRE-        STOCK-
                                            ----------------------------      PAID-IN       RETAINED      HENSIVE        HOLDERS'
                                                 SHARES         AMOUNT        CAPITAL       EARNINGS       LOSS          EQUITY
                                            ----------------  ----------   -------------  ------------  -----------   ------------
<S>                                         <C>               <C>          <C>            <C>           <C>           <C>
Balance at December 31, 1997 ............        20,974,852       $ 210       $ 211,577      $ 28,327       $ (579)     $ 239,535
    Issuance of common stock in
      connection with the Merger ........         9,400,000          94          82,626             -            -         82,720
    401(k) Plan contribution ............            88,205           -             430             -            -            430
    Exercise of stock options ...........           134,900           1           1,143             -            -          1,144
    Tax benefit from exercise of stock
      options ...........................                 -           -             245             -            -            245
    Purchase of common stock ............        (2,660,900)        (27)        (34,045)            -            -        (34,072)
    Net loss ............................                 -           -               -        (5,221)           -         (5,221)
    Currency translation adjustments ....                 -           -               -             -       (1,014)        (1,014)
                                            ----------------  ----------   -------------  ------------  -----------   ------------
Balance at December 31, 1998 ............        27,937,057         278         261,976        23,106       (1,593)       283,767
    401(k) Plan contribution ............            44,444           -             200             -            -            200
Net loss ................................                 -           -               -        (2,442)           -         (2,442)
                                            ================  ==========   =============  ============  ===========   ============
Balance at March 31, 1999 ...............        27,981,501       $ 278       $ 262,176      $ 20,664     $ (1,593)     $ 281,525
                                            ================  ==========   =============  ============  ===========   ============
</TABLE>



The data for the three months ended March 31, 1999 is unaudited.

See accompanying notes.

                                      -5-

<PAGE>





                         LODGIAN, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (Unaudited)
                                 
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED MARCH 31,
                                                                           ----------------------------
                                                                             1999               1998
                                                                          ------------       -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                      $9,968           $ 9,568
                                                                          ------------       -----------
<S>                                                                       <C>                <C> 
INVESTING ACTIVITIES:
    Capital expenditures, net .........................................       (29,848)          (14,258)
    Proceeds from sale of assets ......................................         3,600                 -
    Acquisitions of property and equipment ............................             -           (35,411)
    Net withdrawals (deposits) for capital expenditures ...............        14,200            (5,232)
    Deposits for asset purchases ......................................             -            (8,558)
    Other .............................................................             -               692
                                                                          ------------       -----------
    Net cash used in investing activities .............................       (12,048)          (62,767)
                                                                          ------------       -----------
FINANCING ACTIVITIES:
    Proceeds from issuance of long-term obligations ...................         6,273            54,788
    Proceeds from issuance of common stock ............................             -               515
    Principal payments on long-term obligations .......................        (4,302)           (1,512)
    Payments of deferred loan costs ...................................          (660)             (900)
    Contributions from (distributions to) minority interests ..........          (123)              232
                                                                          ------------       -----------
    Net cash provided by financing activities .........................         1,188            53,123
                                                                          ------------       -----------
Net decrease in cash and cash equivalents .............................          (892)              (76)

Cash and cash equivalents at beginning of period ......................        19,185            15,243
                                                                          ------------       -----------

Cash and cash equivalents at end of period ............................       $18,293           $15,167
                                                                          ============       ===========
SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for:
    Interest, net of amount capitalized ...............................       $22,015           $ 6,636
                                                                          ============       ===========
    Income taxes ......................................................             -             $ 285
                                                                          ============       ===========
</TABLE>



See accompanying notes.


                                      -6-

<PAGE>



                         LODGIAN, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. GENERAL

The condensed consolidated financial statements include the accounts of Lodgian,
Inc.   ("Lodgian"  or  the  "Company"),   its   wholly-owned   subsidiaries  and
partnerships in which Lodgian exercises  control over the  partnerships'  assets
and operations. Lodgian believes it has control of partnerships when the Company
manages  and has control of the  partnerships'  assets and  operations,  has the
ability and  authority  to enter into  financing  arrangements  on behalf of the
entity  or  to  sell  the  assets  of  the  entity  within  reasonable  business
guidelines.  Investments  in  partnerships  (operating  seven  hotels) where the
Company's  ownership is between  20%-50% are accounted for on the equity method.
All significant  intercompany  accounts and transactions have been eliminated in
consolidation.

The accounting  policies followed for quarterly financial reporting are the same
as those disclosed in Note 1 of the Notes to Consolidated  Financial  Statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain all adjustments,  consisting  primarily of normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of March 31,  1999,  and the results of its  operations  and its cash
flows  for the  three  month  periods  ended  March  31,  1999 and  1998.  While
management  believes  that the  disclosures  presented  are adequate to make the
information  not  misleading,  these  financial  statements  should  be  read in
conjunction  with  the  consolidated  financial  statements  and  related  notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.

2.   EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:


                                                   THREE MONTHS ENDED MARCH 31,
                                                   ----------------------------
                                                        1999           1998
                                                       (In Thousands, except
                                                           per share data)
 
Numerator:

Net (loss) income ..............................       $(2,442)        $2,996
                                                   ============    ===========
Denominator:
   Denominator for basic earnings per
       share--weighted-average shares ..........        27,056         20,989
   Effect of dilutive securities:
      Employee stock options ...................             -            448
                                                   ------------    -----------
      Denominator for dilutive earnings per
      share--adjusted weighted-average shares ..        27,056         21,437
                                                   ============    ===========
Basic earning per share:
   Net (loss) income ...........................        $(0.09)         $0.14
                                                   ============    ===========
Diluted earnings per share:
   Net (loss) income ...........................        $(0.09)         $0.14
                                                   ============    ===========


The 1999  computation  of  diluted  earnings  per share did not  include  shares
associated  with the assumed  conversion of the  Convertible  Redeemable  Equity
Structure  Trust  Securities,  employee stock options and  contingent  shares in
connection with the Merger because their inclusion would have been antidilutive.

                                      -7-



<PAGE>



ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

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

Our business strategy includes the acquisition of underperforming hotels and the
implementation  of our operational  initiatives and repositioning and renovation
programs to achieve revenue and margin improvements.  Such initiatives typically
require a 12 to 18 month period before newly  acquired,  underperforming  hotels
are repositioned and stabilized.  During this period,  the revenues and earnings
of these  hotels may be  adversely  affected  and may have a negative  impact on
RevPAR, average daily rate and occupancy rate performance,  as well as operating
margins for the  Company  overall.  In  addition,  our  strategy  also  includes
developing new full service hotels. Newly developed properties typically require
24 months  following  completion  to  stabilize.  To track the  execution of our
repositioning and development  growth strategy's impact on the Company's results
of  operations,   we  classify  our  hotels  as  either   "Stabilized   Hotels,"
"Stabilizing Hotels" or "Being Repositioned Hotels," as described below:

     STABILIZED  HOTELS  are  properties  which  have  experienced  little or no
     disruption to their  operations over the past 24 to 36 months as the result
     of redevelopment or repositioning efforts or newly-constructed hotels which
     have been in service for 24 months or more.

     STABILIZING  HOTELS are (1) properties  which have undergone  renovation or
     repositioning  investment  within  the last 36  months,  which  work is now
     completed, or (2) newly developed properties placed into service within the
     past 24 months. Management believes that these properties should experience
     higher rates of growth in RevPAR and operating  margin than the  Stabilized
     Hotels.  On  average,  our hotels  which  have  undergone  renovation  have
     generally reached  stabilization within approximately 12 to 18 months after
     their  completion  date,  and  our  newly  developed  hotels  have  reached
     stabilization in approximately 24 months after their completion date.

     BEING  REPOSITIONED  HOTELS are  hotels  experiencing  disruption  to their
     operations  due  to  renovation  and  repositioning.   During  this  period
     (generally 12 to 18 months) hotels will usually  experience lower operating
     results,  such as RevPAR,  and  operating  margins.  We expect  significant
     improvements  in the  operating  performance  of those  hotels  which  have
     undergone  repositioning  once  the  renovation  is  completed.  After  the
     reposition  work is completed  these  properties  will be  reclassified  as
     Stabilizing Hotels.

Management  classifies  each  hotel  into  one of the  three  categories  at the
beginning of each fiscal  year.  Management  will  determine  the category  most
appropriate  for each hotel based on its  evaluation of objective and subjective
factors,  including the time of  completion  of renovation  and whether the full
benefit of renovations have been realized.

                                      -8-

<PAGE>



THREE MONTHS ENDED MARCH 31, 1999 ("FIRST  QUARTER 1999")  COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1998 ("FIRST QUARTER 1998")

HISTORICAL RESULTS OF OPERATIONS

In June 1998, the Company  acquired AMI Operating  Partners,  L.P.  ("AMI"),  an
entity that owned and operated 14 hotels, three of which were subsequently sold.
In December 1998, the Company merged (the "Merger") with Impac Hotel Group,  LLC
("Impac"),  an entity that owned or managed 55 hotels,  three of which are under
construction.  Because these  transactions were accounted for using the purchase
accounting method, the results of AMI and Impac are included in our consolidated
results of operations from the time they were acquired.  This makes  comparisons
of our historical operating results with prior periods less meaningful.

REVENUES

Revenues  are  composed of room,  food and  beverage  and other  revenues.  Room
revenues are derived from guest room rentals, whereas food and beverage revenues
primarily  include  sales from our hotel  restaurants,  room  service  and hotel
catering.  Other revenues  include charges for guests'  long-distance  telephone
service,  laundry service,  use of meeting  facilities and fees earned by us for
services rendered in conjunction with managed properties.

Revenues for the Company were $135.8 million for the First Quarter 1999, a 63.8%
increase  over  revenues of $82.9  million for the First  Quarter  1998. Of this
$52.9 million  increase,  $49 million was attributable to the acquisition of AMI
and the Merger.

The following table summarizes  certain  operating data for the Company's hotels
for the three months ended March 31, 1999 and 1998. The Stabilized,  Stabilizing
and Being  Repositioned  Hotels refers to  classifications  in these  respective
categories as of January 1, 1999.


<TABLE>
<CAPTION>

                               HOTELS (1)                ADR               OCCUPANCY                   REVPAR
                        -------------------  -----------------------   ---------------------   -----------------------
                           1999       1998        1999        1998         1999        1998        1999         1998
                           ----       ----        ----        ----         ----        ----        ----         ----
<S>                     <C>         <C>         <C>       <C>          <C>         <C>         <C>         <C>
Stabilized ...........       77         50      $ 73.94      $75.25       62.50%     60.90%       $46.20      $ 45.80
Stabilizing ..........       33         12      $ 75.51      $70.79       58.30%     53.90%       $44.01      $ 38.18
Being Repositioned ...       21          8      $ 73.81      $73.08       42.50%     47.10%       $31.37      $ 34.45
                        --------   --------  -----------  ----------   ----------  ---------   ----------  -----------
Total ................      131         70      $ 74.23      $74.25       57.80%     57.70%       $42.90      $ 42.82
                        ========   ========  ===========  ==========   ==========  =========   ==========  ===========
</TABLE>



(1)  Excludes two hotels managed for third parties and the seven partially owned
     non-consolidated hotels.  All 1998 figures in the table exclude AMI and the
     Merger.


OPERATING EXPENSES

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

Direct  operating  expenses for the Company were $50.4 million  (39.1% of direct
revenues) for the First Quarter 1999 and $33.2 million (42.5% of direct revenue)
for the First Quarter of 1998. Of the $17.2 million increase,  $16.1 million was
attributable to the acquisition of AMI and the Merger.

                                      -9-

<PAGE>

General and administrative  expenses were $5.2 million in First Quarter 1999 and
$2.4 million in First Quarter 1998. Of the $2.8 million increase,  approximately
$2.3  million  was  attributable  to the  acquisition  of AMI  and  the  Merger.
Additionally,   $.5  million  represents  non-recurring  expenses,   principally
severance.

Depreciation and amortization  were $13.8 million in First Quarter 1999 and $7.2
million in First Quarter 1998. The $6.6 million increase was attributable to the
acquisition of AMI, the Merger and the completion of renovation projects.

Other  operating  expenses  were $47.8  million in First  Quarter 1999 and $27.6
million in First Quarter 1998. Of the $20.2 million increase,  $18.4 million was
attributable to the acquisition of AMI and the Merger. In addition, $1.0 million
was  attributable  to  the  Company's  share  of  loss  from  an  unconsolidated
partnership, including $.5 million of depreciation.

As a result of the above,  income  from  operations  was $18.6  million in First
Quarter 1999 as compared to $12.5 million in First Quarter 1998.

Interest  expense was $19.1  million in First  Quarter  1999 and $7.8 million in
First  Quarter  1998.  This increase is primarily a result of an increase in the
level of debt associated with the acquisition of AMI and the Merger.

Minority interest expense was $3.9 million in First Quarter 1999 and $.1 million
in First  Quarter 1998. Of the $3.8 million  increase,  $3.2 million  represents
interest  on  the  Company's  Convertible   Redeemable  Equity  Structure  Trust
Securities that were issued in June 1998.

NET INCOME (LOSS)

After a tax benefit of $1.6 million in First  Quarter  1999 and a provision  for
income taxes of $2.0 million in First Quarter  1998,  the Company had a net loss
of $2.4 million  ($.09 per share) in First Quarter 1999 compared with net income
of $3.0 million ($.14 per share) in First Quarter 1998.

INCOME TAXES

As of  December 31, 1998  the Company had a net  operating  loss carryforward of
approximately $45.3 million for federal income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity are existing cash balances and cash
flow from operations.  The Company had earnings from operations before interest,
taxes, depreciation and amortization ("EBITDA") for the three months ended March
31, 1999 of $32.9 million,  a 66.2% increase over the $19.8 million for the 1998
period. EBITDA is a widely regarded industry measure of lodging performance used
in the assessment of hotel property  values although EBITDA is not indicative of
and should not be used as an  alternative  to net income or net cash provided by
operations as specified by generally accepted  accounting  principles.  Net cash
provided by operating  activities  for the three months ended March 31, 1999 was
$10.0 million as compared to $9.6 million for the 1998 period.

At March 31, 1999, the Company had a working capital deficit of $62.3 million as
compared to a working capital deficit of $65.1 million at December 31, 1998.

At March 31, 1999 the Company's long-term  obligations were $818.6 million,  not
including  $175  million  of  Convertible   Redeemable  Equity  Structure  Trust
Securities.  The Company's long-term obligations were $816.6 million at December
31, 1998.

Certain of the  Company's  hotels are operated  under  license  agreements  that
require the Company to make capital  improvements in accordance with a specified
time schedule.  Additionally,  in connection with the refinancing of hotels, the
Company has agreed to make  certain  capital  improvements  and, as of March 31,
1999, has approximately


                                      -10-

<PAGE>

$16 million escrowed for such improvements.  The Company estimates its remaining
obligations  for all of such  commitments to be  approximately  $62 million,  of
which approximately $27 million is expected to be spent during 1999 and 2000.

In connection  with the Merger on December 11, 1998,  the Company  obtained $265
million of mortgage notes from Lehman Brothers Holding, Inc. ("Lehman"). The net
proceeds  were  used to  repay  existing  debt  and  related  obligations.  This
financing contains various covenants and coverage ratios, with which the Company
is in compliance at March 31, 1999.

At the time of the Merger,  $23 million of the $265  million  provided by Lehman
was set aside in escrow for future capital  improvements.  In March 1999, Lehman
released  $15  million  from  escrow,  and  simultaneously  issued the Company a
commitment  for $15  million to  replenish  this escrow at a future  date.  This
additional  loan is  expected  to close in May,  thereby  increasing  the  total
facility  to $280  million  on the  same  terms  and  conditions  as  previously
described.

Continuation of the Company's  current growth  strategy will require  additional
financing. Further, under the terms of the Lehman financing, future acquisitions
will be subject to Lehman's prior  approval,  and the Company does not currently
have any lines of credit.  The Company's  financial position may, in the future,
be  strengthened  through  an  increase  in  revenues,  the  refinancing  of its
properties  or capital from equity or debt  markets.  There is no assurance  the
Company will be successful in these efforts.

INFLATION

The rate of inflation has not had a material effect on the Company's revenues or
costs and expenses in recent years and it is not anticipated that inflation will
have a material effect on the Company in the near term.

YEAR 2000 MATTERS

The Year 2000 Issue is the result of certain  computer  programs  being  written
using two digits rather than four to define the applicable year.  Certain of the
Company's  computer  programs  may  recognize a date using "00" as the year 1900
rather  than the  year  2000.  This  could  result  in  miscalculations  causing
disruptions   of  operations,   including  a  temporary   inability  to  process
transactions, send invoices, or engage in similar normal business activities.

Based on its recently completed assessment,  the Company determined that it will
be required to modify or replace  portions of its existing  software so that its
computer systems will properly utilize dates beyond December 31, 1999.

The  Company has  divided  its year 2000  issues  into what it  considers  to be
critical  and  non-critical  issues.  The Company  believes  that in its line of
business the critical issues revolve around the ability to process  transactions
from the  reservation  stage through  settlements  and  collection at the hotel.
Additionally,  of prime importance is the maintenance of accurate accounting and
corporate records.

The systems that the Company has  identified as being  critical  include but may
not be limited to the following:  Unix  Operating  System,  Property  Management
Systems,  Point of Sale Systems,  Oracle  General  Ledger System and Credit Card
Processing,    as   well   as   the   Company's   banking    relationships   and
telecommunications vendors.

The Company has also identified  non-critical issues including,  but not limited
to,  stand alone  personal  computers,  other third party  vendors and  possible
security issues.

The Company has initiated formal  communications with its significant  suppliers
to determine  the Company's  vulnerability  to those third  parties'  failure to
remediate their own Year 2000 Issue.  There can be no guarantee that the systems
of the  Company's  suppliers  will be  timely  converted  and  would not have an
adverse effect on the Company.

                                      -11-

<PAGE>

The Company will utilize both internal and external  resources to reprogram,  or
replace, and test the software for Year 2000 modifications.  The Company has not
determined  the total  cost of the year  2000  project.  However,  the costs are
neither  expected  to  exceed  $1,000,000  nor  have a  material  effect  on its
financial  statements.  All  expenditures  have  been  appropriately  identified
through the 1999 hotel capital  improvements  budget. The Company has spent less
than $150,000 to date, all of which has been expensed.  The Company  anticipates
completing the Year 2000 project not later than August 31, 1999,  which is prior
to any anticipated impact on its operating systems.

The costs of the  project  and the date on which the  Company  believes  it will
complete the Year 2000  modifications  are based on management's best estimates.
However,  there can be no guarantee  that these  estimates  will be achieved and
actual results could differ materially from those anticipated.

FORWARD-LOOKING STATEMENTS

Statements  in  this  Form  10-Q  which  express  "belief,"  "anticipation,"  or
"expectation,"  as well as other  statements  which are not historical fact, are
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995 and involve  risks and  uncertainties.  Moreover,
there are important  factors which include,  but are not limited to, general and
local economic  conditions,  risks relating to the  acquisition,  renovation and
operation of hotels,  government legislation and regulation,  competition in the
lodging  industry,  changes in interest rates,  the impact of rapid growth,  the
availability  of capital to finance  growth,  the historical  cyclicality of the
lodging  industry,  year 2000  matters  and  other  factors  described  in other
Lodgian, Inc. filings with the United States Securities and Exchange Commission,
all of which are  difficult  to predict and many of which are beyond the control
of  the   Company.   Actual   results   could  differ   materially   from  these
forward-looking statements. In light of the risks and uncertainties, there is no
assurance that the forward-looking  statements  contained in this Form 10-Q will
in fact prove correct or occur. The Company does not undertake any obligation to
publicly  release  the  results  of  any  revisions  to  these   forward-looking
statements to reflect future events or circumstances.

                                      -12-


<PAGE>

PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         (a)   Exhibits

               A list  of the  exhibits  required  to be  filed  as part of this
               Report  on Form 10-Q is set forth in the  "Exhibit  Index"  which
               immediately precedes such exhibits, and is incorporated herein by
               reference.

         (b)   Reports on Form 8-K

               A report on Form 8-K/A was filed on February 26,  1999,  relating
               to pro forma financial statements with respect to the Merger.

               A report  on Form 8-K was  filed on April 2,  1999,  relating  to
               Lodgian's Shareholder Rights Plan.

                                      -13-

<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.

                                 LODGIAN, INC.
                                 Registrant


DATE: May 15, 1999               /s/ Robert S. Cole
                                 Robert S. Cole
                                 President  and Chief Executive Officer



DATE: May 15, 1999               /s/ Kenneth R. Posner
                                 Kenneth R. Posner
                                 Chief Financial Officer

                                      -14-

<PAGE>




                                  EXHIBIT INDEX



          Exhibit Number                             Description

               27                     Financial Data Schedule (For SEC use only)



                                      -15-