##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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FORM 10-Q/A(Amendment No. 1)

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the Period ended March 31,
    2004                                                     
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from                           to                             

Commission file no. 1-14537

Lodgian, Inc.

(Exact name of registrant as specified in its
charter)


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

Registrants telephone number, including
area code

(404) 364-9400


(Former name, former address and former fiscal
year, if changed since last report):Not applicable

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

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

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

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
June 25, 2004
|       |  |                                
|Common |  | 24,531,155                     



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EXPLANATORY NOTE

Lodgian,
Inc. is filing this Amendment No. 1 to Form 10-Q to amend
its quarterly report on Form 10-Q for the quarter ended
March 31, 2004 to revise Part I, Item 1 (Lodgian, Inc.
Condensed Consolidated Financial Statements and Notes to Condensed
Consolidated Financial Statements), to correct certain errors created
by incorrect formatting in a table in Note 8 to the Condensed
Consolidated Financial Statements. This Form 10-Q/A makes no
changes, other than as noted above, except to include updated officer
certifications as Exhibits 31.1, 31.2 and 32. This Amendment
does not modify or update the disclosures contained in the
Form 10-Q in any other respect.

LODGIAN, INC. AND SUBSIDIARIES

INDEX


|                                                   |  |                                                                                                                                  |    |      |    | 
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                   |  |                                                                                                                                  |    | Page
|                                                   |  |                                                                                                                                  |    |     
|PART I. FINANCIAL
    INFORMATION                  |  |                                                                                                                                  |    |     
|Item 1.                                            |  | Financial Statements:                                                                                                            |    |      |    | 
|                                                   |  | Condensed Consolidated
    Balance Sheets as of March 31, 2004 and December 31,
    2003 (unaudited)                             |    |      | 2  | 
|                                                   |  | Condensed Consolidated
    Statements of Operations for the Three Months Ended
    March 31, 2004 and March 31, 2003 (unaudited) |    |      | 3  | 
|                                                   |  | Condensed Consolidated
    Statement of Stockholders Equity for the Three Months
    Ended March 31, 2004 (unaudited)           |    |      | 4  | 
|                                                   |  | Condensed Consolidated
    Statements of Cash Flows for the Three Months Ended
    March 31, 2004 and March 31, 2003 (unaudited) |    |      | 5  | 
|                                                   |  | Notes to Condensed
    Consolidated Financial Statements (unaudited)                                                             |    |      | 6  | 
|PART II. OTHER
    INFORMATION                     |  |                                                                                                                                  |    |     
|Item 6.                                            |  | Exhibits and Reports on
    Form 8-K                                                                                             |    |      | 19 | 
|Signatures                                         |  |                                                                                                                                  | 20 |     
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO      
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO      
|EX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO



1



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##### Table of Contents






PART I  FINANCIAL
INFORMATION






|        |                     
|------- | --------------------
|Item 1. | Financial Statements

LODGIAN, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE
SHEETS


|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |         |         | 
|---------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------------- | ------- | - | ------- | ------- | ------- | 
|                                         |                                                                                                                                                                              | March 31, 2004             |         | December 31, 2003
|                                         |                                                                                                                                                                              |                            |         |                  
|                                         |                                                                                                                                                                              |                           
|                                         |                                                                                                                                                                              | (Unaudited in thousands,  
|                                         |                                                                                                                                                                              | except share data)        
|ASSETS                                  
|Current assets:                          |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         | Cash and cash equivalents                                                                                                                                                    |                            | $       | 12,662            |         |   | $       | 10,897  |        
|                                         | Cash, restricted                                                                                                                                                             |                            |         | 7,447             |         |   |         | 7,084   |        
|                                         | Accounts receivable (net of allowances:
    2004  $730; 2003  $689)                                                                                                        |                            |         | 11,483            |         |   |         | 8,169   |        
|                                         | Inventories                                                                                                                                                                  |                            |         | 5,666             |         |   |         | 5,609   |        
|                                         | Prepaid expenses and other current assets                                                                                                                                    |                            |         | 16,670            |         |   |         | 17,068  |        
|                                         | Assets held for sale                                                                                                                                                         |                            |         | 55,788            |         |   |         | 68,567  |        
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         |                                                                                                                                                                              | Total current assets       |         |                   | 109,716 |   |         |         | 117,394 | 
|Property and equipment, net              |                                                                                                                                                                              |                            | 561,461 |                   |         |   | 563,818 |        
|Deposits for capital expenditures        |                                                                                                                                                                              |                            | 13,577  |                   |         |   | 15,782  |        
|Other assets, net                        |                                                                                                                                                                              |                            | 11,039  |                   |         |   | 12,180  |        
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         |                                                                                                                                                                              | $                          | 695,793 |                   |         | $ | 709,174 |        
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         | Accounts payable                                                                                                                                                             |                            | $       | 7,456             |         |   | $       | 7,131   |        
|                                         | Other accrued liabilities                                                                                                                                                    |                            |         | 32,401            |         |   |         | 31,432  |        
|                                         | Advance deposits                                                                                                                                                             |                            |         | 3,133             |         |   |         | 1,882   |        
|                                         | Current portion of long-term debt                                                                                                                                            |                            |         | 18,971            |         |   |         | 16,563  |        
|                                         | Liabilities related to assets held for sale                                                                                                                                  |                            |         | 47,340            |         |   |         | 57,948  |        
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         |                                                                                                                                                                              | Total current liabilities  |         |                   | 109,301 |   |         |         | 114,956 | 
|Long-term debt:                          |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         | 12.25% Cumulative preferred shares subject to
    mandatory redemption                                                                                                       |                            |         | 146,462           |         |   |         | 142,177 |        
|                                         | Long-term obligations                                                                                                                                                        |                            |         | 404,044           |         |   |         | 409,115 |        
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         |                                                                                                                                                                              | Total long-term debt       |         |                   | 550,506 |   |         |         | 551,292 | 
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         |                                                                                                                                                                              | Total liabilities          |         |                   | 659,807 |   |         |         | 666,248 | 
|Minority interests                       |                                                                                                                                                                              |                            | 2,467   |                   |         |   | 2,320   |        
|Commitments and contingencies            |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|Stockholders equity:                    |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         | Common stock, $.01 par value,
    30,000,000 shares authorized; 2,333,832 and 2,333,591
    issued and outstanding at March 31, 2004 and
    December 31, 2003, respectively |                            |         | 23                |         |   |         | 23      |        
|                                         | Additional paid-in capital                                                                                                                                                   |                            |         | 89,878            |         |   |         | 89,874  |        
|                                         | Unearned stock compensation                                                                                                                                                  |                            |         | (458              | )       |   |         | (508    | )      
|                                         | Accumulated deficit                                                                                                                                                          |                            |         | (57,193           | )       |   |         | (50,107 | )      
|                                         | Accumulated other comprehensive income                                                                                                                                       |                            |         | 1,269             |         |   |         | 1,324   |        
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         |                                                                                                                                                                              | Total stockholders equity |         |                   | 33,519  |   |         |         | 40,606  | 
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        
|                                         |                                                                                                                                                                              | $                          | 695,793 |                   |         | $ | 709,174 |        
|                                         |                                                                                                                                                                              |                            |         |                   |         |   |         |        

See notes to condensed consolidated financial
statements.

2



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |        |        |  
|------------------------------------------------------------------------- | --------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | -------------- | ------ | - | ------- | ------ | ------ | -
|                                                                          |                                                           |                                                                                                                                                      
|                                                                          |                                                           | Three Months Ended                                                                                                                                   
|                                                                          |                                                           |                                                                                                                                                      
|                                                                          |                                                           | March 31, 2004                                                                                                                                        |        | March 31, 2003
|                                                                          |                                                           |                                                                                                                                                       |        |               
|                                                                          |                                                           |                                                                                                                                                      
|                                                                          |                                                           | (Unaudited in thousands, except                                                                                                                      
|                                                                          |                                                           | per share data)                                                                                                                                      
|Revenues:                                                                 |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          | Rooms                                                     |                                                                                                                                                       | $      | 57,563         |        |   | $       | 53,914 |       
|                                                                          | Food and beverage                                         |                                                                                                                                                       |        | 16,488         |        |   |         | 16,607 |       
|                                                                          | Other                                                     |                                                                                                                                                       |        | 2,754          |        |   |         | 2,858  |       
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          |                                                           |                                                                                                                                                       | 76,805 |                |        |   | 73,379  |       
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Operating expenses:                                                       |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          | Direct:                                                   |                                                                                                                                                       |        |                |        |   |         |        |       
|                                                                          |                                                           | Rooms                                                                                                                                                 |        |                | 16,018 |   |         |        | 15,363 |  
|                                                                          |                                                           | Food and beverage                                                                                                                                     |        |                | 11,534 |   |         |        | 11,734 |  
|                                                                          |                                                           | Other                                                                                                                                                 |        |                | 1,972  |   |         |        | 1,938  |  
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          |                                                           |                                                                                                                                                       | 29,524 |                |        |   | 29,035  |       
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          |                                                           |                                                                                                                                                       | 47,281 |                |        |   | 44,344  |       
|Other operating expenses:                                                 |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          | General, administrative and other                         |                                                                                                                                                       |        | 34,236         |        |   |         | 35,106 |       
|                                                                          | Depreciation and amortization                             |                                                                                                                                                       |        | 6,805          |        |   |         | 7,422  |       
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          |                                                           | Other operating expenses                                                                                                                              |        |                | 41,041 |   |         |        | 42,528 |  
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          |                                                           |                                                                                                                                                       | 6,240  |                |        |   | 1,816   |       
|Other income (expenses):                                                  |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          | Interest income and other                                 |                                                                                                                                                       |        | 43             |        |   |         | 83     |       
|                                                                          | Interest expense:                                         |                                                                                                                                                       |        |                |        |   |         |        |       
|                                                                          |                                                           | Preferred stock dividend                                                                                                                              |        |                | (4,285 | ) |         |        |       |  
|                                                                          |                                                           | Other interest expense (contractual interest:
    $8.2 million and $6.8 million for the three months
    ended March 31, 2004 and 2003, respectively) |        |                | (8,159 | ) |         |        | (6,279 | )
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Loss before income taxes, reorganization items
    and minority interests |                                                           |                                                                                                                                                       | (6,161 | )              |        |   | (4,380  | )     
|Reorganization items                                                      |                                                           |                                                                                                                                                       |       |                |        |   | (1,237  | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Loss before income taxes and minority interest                            |                                                           |                                                                                                                                                       | (6,161 | )              |        |   | (5,617  | )     
|Minority interests                                                        |                                                           |                                                                                                                                                       | (147   | )              |        |   | (148    | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Loss before income taxes  continuing
    operations                      |                                                           |                                                                                                                                                       | (6,308 | )              |        |   | (5,765  | )     
|Provision for income taxes  continuing
    operations                    |                                                           |                                                                                                                                                       | (76    | )              |        |   | (76     | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Loss  continuing operations                                              |                                                           |                                                                                                                                                       | (6,384 | )              |        |   | (5,841  | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Discontinued operations:                                                  |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          | Loss from discontinued operations before income
    taxes |                                                                                                                                                       |        | (702           | )      |   |         | (3,243 | )     
|                                                                          | Income tax provision                                      |                                                                                                                                                       |        |               |        |   |         |       |       
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          | Loss from discontinued operations                         |                                                                                                                                                       |        | (702           | )      |   |         | (3,243 | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Net loss                                                                  |                                                           |                                                                                                                                                       | (7,086 | )              |        |   | (9,084  | )     
|Preferred stock dividend                                                  |                                                           |                                                                                                                                                       |       |                |        |   | (3,776  | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Net loss attributable to common stock                                     |                                                           | $                                                                                                                                                     | (7,086 | )              |        | $ | (12,860 | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|Basic and diluted loss per common share:                                  |                                                           |                                                                                                                                                       |        |                |        |   |         |       
|                                                                          | Net loss attributable to common stock                     |                                                                                                                                                       | $      | (3.04          | )      |   | $       | (5.51  | )     
|                                                                          |                                                           |                                                                                                                                                       |        |                |        |   |         |       

See notes to condensed consolidated financial
statements.

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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS EQUITY


|                                            |                                                                       |                                   |           |            |  |          |    |              |  |               |        |                   |  |        |      |   |  |   |         |        |   |   |       |     |   |   |        |        |  
|------------------------------------------- | --------------------------------------------------------------------- | --------------------------------- | --------- | ---------- |  | -------- | -- | ------------ |  | ------------- | ------ | ----------------- |  | ------ | ---- | - |  | - | ------- | ------ | - | - | ----- | --- | - | - | ------ | ------ | -
|                                            |                                                                       |                                   |           |            |  |          |    |              |  | Accumulated   |        |                  
|                                            |                                                                       | Common Stock                      |           | Additional |  | Unearned |    |              |  | Other         |        | Total            
|                                            |                                                                       |                                   |           | Paid-in    |  | Stock    |    | Accumulated  |  | Comprehensive |        | Stockholders    
|                                            |                                                                       | Shares                            |           | Amount     |  | Capital  |    | Compensation |  | Deficit       |        | Loss (Net of Tax) |  | Equity
|                                            |                                                                       |                                   |           |            |  |          |    |              |  |               |        |                   |  |       
|                                            |                                                                       |                                  
|                                            |                                                                       | (In thousands, except share data)
|Balance December 31, 2003                   |                                                                       |                                   | 2,333,591 |            |  | $        | 23 |              |  | $             | 89,874 |                   |  | $      | (508 | ) |  | $ | (50,107 | )      |   | $ | 1,324 |     |   | $ | 40,606 |       
|Amortization of unearned stock compensation |                                                                       |                                   |          |            |  |          |   |              |  |               |       |                   |  |        | 50   |   |  |   |        |        |   |   |      |     |   |   | 50     |       
|Exercise of stock options                   |                                                                       |                                   | 241       |            |  |          |   |              |  |               | 4      |                   |  |        |     |   |  |   |        |        |   |   |      |     |   |   | 4      |       
|Comprehensive loss:                         |                                                                       |                                   |           |            |  |          |    |              |  |               |        |                   |  |        |      |   |  |   |         |        |   |   |       |     |   |   |        |       
|                                            | Net loss                                                              |                                   |           |           |  |          |    |             |  |               |        |                  |  |        |      |  |  |   |         | (7,086 | ) |   |       |    |   |   |        | (7,086 | )
|                                            | Currency translation adjustments (related taxes
    estimated at nil) |                                   |           |           |  |          |    |             |  |               |        |                  |  |        |      |  |  |   |         |       |   |   |       | (55 | ) |   |        | (55    | )
|                                            |                                                                       |                                   |           |            |  |          |    |              |  |               |        |                   |  |        |      |   |  |   |         |        |   |   |       |     |   |   |        |       
|Total comprehensive loss                    |                                                                       |                                   |           |            |  |          |   |              |  |               |       |                   |  |        |     |   |  |   |        |        |   |   |      |     |   |   | (7,141 | )     
|                                            |                                                                       |                                   |           |            |  |          |    |              |  |               |        |                   |  |        |      |   |  |   |         |        |   |   |       |     |   |   |        |       
|Balance March 31, 2004                      |                                                                       |                                   | 2,333,832 |            |  | $        | 23 |              |  | $             | 89,878 |                   |  | $      | (458 | ) |  | $ | (57,193 | )      |   | $ | 1,269 |     |   | $ | 33,519 |       
|                                            |                                                                       |                                   |           |            |  |          |    |              |  |               |        |                   |  |        |      |   |  |   |         |        |   |   |       |     |   |   |        |       

The comprehensive loss for the three months
ended March 31, 2003 was $8.7 million.

See notes to condensed consolidated financial
statements.

4



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |         |       |        |  
|--------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | -------------------------------------------------- | --------- | ----- | ------ | ------ | ------- | ----- | ------ | -
|                                                                            |                                                                                                            |                                                           
|                                                                            |                                                                                                            | Three Months Ended                                        
|                                                                            |                                                                                                            |                                                           
|                                                                            |                                                                                                            | March 31,                                                  |                                                    | March 31,
|                                                                            |                                                                                                            | 2004                                                       |                                                    | 2003     
|                                                                            |                                                                                                            |                                                            |                                                    |          
|                                                                            |                                                                                                            |                                                           
|                                                                            |                                                                                                            | (Unaudited in                                             
|                                                                            |                                                                                                            | thousands)                                                
|Operating activities:                                                       |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|                                                                            | Net loss                                                                                                   |                                                            | $                                                  | (7,086    | )     |        | $      | (9,084  | )    
|                                                                            | Less: loss from discontinued operations                                                                    |                                                            |                                                    | 702       |       |        |        | 3,243   |      
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|                                                                            | Loss  continuing operations                                                                               |                                                            |                                                    | (6,384    | )     |        |        | (5,841  | )    
|                                                                            | Adjustments to reconcile loss from continuing
    operations to net cash provided by operating activities: |                                                            |                                                    |           |       |        |        |         |      
|                                                                            |                                                                                                            | Depreciation and amortization                              |                                                    |           | 6,805 |        |        |         | 7,422 |       
|                                                                            |                                                                                                            | Amortization of unearned stock compensation                |                                                    |           | 50    |        |        |         |      |       
|                                                                            |                                                                                                            | Preferred stock dividends                                  |                                                    |           | 4,285 |        |        |         |      |       
|                                                                            |                                                                                                            | Minority interests                                         |                                                    |           | 147   |        |        |         | 148   |       
|                                                                            |                                                                                                            | Write-off and amortization of deferred financing
    costs |                                                    |           | 1,457 |        |        |         | 594   |       
|                                                                            |                                                                                                            | Other                                                      |                                                    |           | 209   |        |        |         | 184   |       
|                                                                            |                                                                                                            | Changes in operating assets and liabilities:               |                                                    |           |       |        |        |         |       |       
|                                                                            |                                                                                                            |                                                            | Accounts receivable, net of allowances             |           |       | (3,314 | )      |         |       | (2,275 | )
|                                                                            |                                                                                                            |                                                            | Inventories                                        |           |       | (57    | )      |         |       | 20     |  
|                                                                            |                                                                                                            |                                                            | Prepaid expenses, other assets and restricted cash |           |       | 422    |        |         |       | 10,833 |  
|                                                                            |                                                                                                            |                                                            | Accounts payable                                   |           |       | 594    |        |         |       | (55    | )
|                                                                            |                                                                                                            |                                                            | Other accrued liabilities                          |           |       | 2,894  |        |         |       | (3,508 | )
|                                                                            |                                                                                                            |                                                            | Advance deposits                                   |           |       | 1,251  |        |         |       | 1,062  |  
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Net cash provided by operating activities from
    continuing operations    |                                                                                                            |                                                            | 8,359                                              |           |       |        | 8,584  |        
|Net cash used in operating activities from
    discontinued operations      |                                                                                                            |                                                            | (2,246                                             | )         |       |        | (2,269 | )      
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Net cash provided by operating activities                                   |                                                                                                            |                                                            | 6,113                                              |           |       |        | 6,315  |        
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Investing activities:                                                       |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|                                                                            | Capital improvements                                                                                       |                                                            |                                                    | (5,001    | )     |        |        | (10,309 | )    
|                                                                            | Net proceeds from disposition of discontinued
    operations                                               |                                                            |                                                    | 13,983    |       |        |        |        |      
|                                                                            | Withdrawals of deposits for capital expenditures                                                           |                                                            |                                                    | 2,205     |       |        |        | 6,176   |      
|                                                                            | Other                                                                                                      |                                                            |                                                    | (42       | )     |        |        | (357    | )    
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Net cash provided by (used in) investing
    activities                     |                                                                                                            |                                                            | 11,145                                             |           |       |        | (4,490 | )      
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Financing activities:                                                       |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|                                                                            | Proceeds from exercise of stock options                                                                    |                                                            |                                                    | 4         |       |        |        |        |      
|                                                                            | Principal payments on long-term debt                                                                       |                                                            |                                                    | (14,936   | )     |        |        | (2,396  | )    
|                                                                            | Payments of deferred financing costs                                                                       |                                                            |                                                    | (561      | )     |        |        | (352    | )    
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Net cash used in financing activities                                       |                                                                                                            |                                                            | (15,493                                            | )         |       |        | (2,748 | )      
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Effect of exchange rate changes on cash                                     |                                                                                                            |                                                            |                                                   |           |       |        |       |        
|Net increase in cash and cash equivalents                                   |                                                                                                            |                                                            | 1,765                                              |           |       |        | (923   | )      
|Cash and cash equivalents at beginning of period                            |                                                                                                            |                                                            | 10,897                                             |           |       |        | 10,875 |        
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|                                                                            |                                                                                                            | $                                                          | 12,662                                             |           |       | $      | 9,952  |        
|                                                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Supplemental cash flow information:                                         |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|Cash paid during the period for:                                            |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|                                                                            | Interest, net of the amounts capitalized shown
    below                                                   |                                                            | $                                                  | 7,561     |       |        | $      | 6,432   |      
|                                                                            | Interest capitalized                                                                                       |                                                            |                                                    | 75        |       |        |        | 216     |      
|                                                                            | Income taxes, net of refunds                                                                               |                                                            |                                                    | 234       |       |        |        |        |      
|Supplemental disclosure of non-cash investing and
    financing activities: |                                                                                                            |                                                            |                                                    |           |       |        |        |        
|                                                                            | Net non-cash debt increase (decrease)                                                                      |                                                            |                                                    | 44        |       |        |        | (15,922 | )    
|                                                                            | Issuance of promissory notes as consideration for
    taxation liabilities                                 |                                                            |                                                    | 2,369     |       |        |        |        |      

See notes to consolidated financial statements.

5



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##### Table of Contents






LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(Unaudited)


(Throughout this Form 10-Q, we will use
the terms Lodgian, we, our, and
us, to refer to Lodgian, Inc. and unless the
context otherwise requires or expressly states, our
subsidiaries).



|   |                 
|-- | ----------------
|1. | Business Summary

We are one of the largest independent owners and
operators of full-service hotels in the United States in terms
of our number of guest rooms and gross annual revenues, as
reported by Hotel & Motel Management Magazine in
September 2003. We are considered an independent owner and
operator because we do not operate our hotels under our own
name. We operate substantially all of our hotels under
nationally recognized brands, such as Crowne Plaza,
Holiday Inn and Marriott. As of
May 10, 2004, we operated 88 hotels with an aggregate of
16,627 rooms, located in 30 states and Canada. Of the 88
hotels, 78 hotels, with an aggregate of 14,348 rooms, are part
of our continuing operations, while 10 hotels, with an aggregate
of 2,279 rooms, are held for sale. Our portfolio of 88 hotels
consists of:



| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | 83 hotels that we wholly own and operate through
    subsidiaries;                                                                      
|
| |  | four hotels that we operate in joint ventures in
    which we have a 50% or greater voting equity interest and
    exercise control; and
|
| |  | one hotel that we operate in a joint venture in
    which we have a 30% non-controlling equity interest.                                

We consolidate all of these hotels in our
financial statements, other than the one hotel in which we hold
a non-controlling equity interest and which we account for under
the equity method.

Our hotels are primarily full-service properties
that offer food and beverage services, meeting space and banquet
facilities and compete in the midscale and upscale market
segments of the lodging industry. As of May 10, 2004, we
operated all but three of our hotels under franchises obtained
from nationally recognized hospitality franchisors. We operated
60 of our hotels under franchises obtained from InterContinental
Hotels Group as franchisor of the Crowne Plaza, Holiday Inn,
Holiday Inn Select and Holiday Inn Express brands. We operated
15 of our hotels under franchises from Marriott International as
franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn
by Marriott and Residence Inn by Marriott brands. We operate
another 10 hotels under other nationally recognized brands. We
believe that these strong national brands afford us many
benefits such as guest loyalty and market share premiums.



|   |        
|-- | -------
|2. | General

Our condensed consolidated financial statements
include the accounts of Lodgian, Inc., its wholly-owned
subsidiaries and four joint ventures in which Lodgian, Inc.
has a controlling financial interest (owns a 50% or greater
voting equity interest and exercises control). We believe we
have control of the joint ventures when we manage and have
control of the joint ventures assets and operations. We
report the third party partners share of the net income or
loss of these joint ventures and their share of the joint
ventures equity as minority interest. We include in other
assets our investment in the hotel in which we hold a minority
interest and which we account for under the equity method. We
report our share of the income or loss of this minority-owned
hotel as part of interest income and other. All significant
intercompany accounts and transactions have been eliminated in
consolidation.

The accounting policies which we follow for
quarterly financial reporting are the same as those which we
disclosed in Note 1 of the Notes to Consolidated Financial
Statements included in our Annual Report on Form 10-K
(Form 10-K) for the year ended
December 31, 2003.

During 2003, we developed a portfolio improvement
strategy which was consistent with our goals of operating a
portfolio of profitable, well-maintained and appealing hotels at
superior locations in strong markets. In accordance with this
strategy and our efforts to reduce debt and interest costs, we
identified 19

6



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

hotels, one office building and three land
parcels for sale. Between November 1, 2003 and May 10,
2004, we sold the office building and nine of the nineteen
hotels. As of May 10, 2004, our portfolio consisted of 88
hotels, 78 of which represent our continuing portfolio
(including one hotel in which we have a non-controlling equity
interest which we do not consolidate).

In our opinion, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments, consisting primarily of normal recurring
adjustments, necessary to present fairly our financial position
as of March 31, 2004, the results of our operations for the
three months ended March 31, 2004 and 2003 and our cash
flows for the three months ended March 31, 2004 and 2003.
Our results for interim periods are not necessarily indicative
of our results for the entire year. You should read these
financial statements in conjunction with our consolidated
financial statements and related notes included in our Annual
Report on Form 10-K for the year ended December 31,
2003.

As we prepare our financial statements in
accordance with accounting principles generally accepted in the
United States of America (GAAP), we reclassify certain prior
period amounts to conform to the current periods
presentation. We also make estimates and assumptions which
affect:



| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | the reported amounts of assets and liabilities;                                                  
|
| |  | the reported amounts of revenues and expenses
    during the reporting period; and               
|
| |  | the disclosures of contingent assets and
    liabilities at the date of our financial statements.

Our actual results could differ from our
estimates.



| |                    
| | -------------------
| | Reverse Stock Split

On April 27, 2004, our Board of Directors
authorized a reverse stock split of our common stock in a ratio
of one-for-three (1:3). The reverse split affected all of our
issued and outstanding common shares, warrants and stock
options. The record date for the reverse split was
April 29, 2004 and our new common stock began trading under
the split adjustment on April 30, 2004.

Fractional shares which resulted from the reverse
stock split are payable in cash. Each holder of a fractional
share of common stock after the effective date of the reverse
split has been or will be paid cash equal to the product of
(i) the average of the closing prices of the common stock
for the last ten trading days prior to April 30, 2004,
multiplied by (ii) the fraction of a share of common stock
held by such holder.

All amounts for common stock, warrants, stock
options, and all earnings per share computations have been
retroactively adjusted to reflect this change in our capital
structure.



|   |                         
|-- | ------------------------
|3. | Stock-based Compensation

As disclosed in Note 2 above, on
April 27, 2004, our Board of Directors authorized a reverse
stock split of our common stock in a ratio of one-for-three
(1:3). All stock option disclosures below have been
retroactively adjusted to reflect the reverse stock split.

As we previously disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2003, on
November 25, 2002, we adopted a new stock incentive plan
which replaced the Option Plan previously in place. In
accordance with the Stock Incentive Plan, we can grant awards to
acquire up to 353,333 shares of common stock to our
directors, officers, or other key employees or consultants as
determined by a committee appointed by our Board of Directors.
Awards may consist of stock options, stock appreciation rights,
stock awards, performance share awards, section 162(m)
awards or other awards determined by the committee. We cannot
grant stock options pursuant to the Stock Incentive Plan at an
exercise price which is less than 100% of the fair market value
per share on the date of the grant. Vesting,

7



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

exercisability, payment and other restrictions
pertaining to any awards made pursuant to the Stock Incentive
Plan are determined by the Committee. At our 2004 annual
meeting, stockholders approved an amendment and restatement of
the Stock Incentive Plan to, among other things, increase the
number of shares of common stock available for issuance
thereunder by 29,667 immediately and, in the event we consummate
a firm commitment, underwritten public offering of our common
stock, by an additional amount to be determined pursuant to a
formula.

We present below a summary of our stock option
plan and the restricted stock units activity under the plan for
the three months ended March 31, 2004:

|                           |           |         |         |                  |   |   |       |       | 
|-------------------------- | --------- | ------- | ------- | ---------------- | - | - | ----- | ----- | 
|                           |           |         |         | Weighted Average
|                           |           | Options |         | Exercise Price  
|                           |           |         |         |                 
|Balance, December 31, 2003 |           |         | 157,529 |                  |   | $ | 13.92 |      
|                           | Exercised |         |         | (241             | ) |   |       | 15.21 | 
|                           | Forfeited |         |         | (3,164           | ) |   |       | 15.21 | 
|                           |           |         |         |                  |   |   |       |      
|Balance, March 31, 2004    |           |         | 154,124 |                  |   | $ | 13.91 |      
|                           |           |         |         |                  |   |   |       |      

|                           |           |             |        |     | 
|-------------------------- | --------- | ----------- | ------ | --- | 
|                           |           | Restricted 
|                           |           | Stock Units
|                           |           |            
|Balance, December 31, 2003 |           |             | 66,666 |    
|                           | Issued    |             |        |    | 
|                           | Forfeited |             |        |    | 
|                           |           |             |        |    
|Balance, March 31, 2004    |           |             | 66,666 | (1)
|                           |           |             |        |    



---



|    |                                                                
|--- | ---------------------------------------------------------------
|(1) | At March 31, 2004, none of the restricted
    stock had vested.

In the following table, we summarize information
for options outstanding and exercisable at March 31, 2004:

|                 |  |                     |         |                           |  |                  |     |        |  |                  |       |  |  |  |        |  |  |   |       | 
|---------------- |  | ------------------- | ------- | ------------------------- |  | ---------------- | --- | ------ |  | ---------------- | ----- |  |  |  | ------ |  |  | - | ----- | 
|                 |  |                     |         |                          
|                 |  | Options Outstanding |         | Options Exercisable      
|                 |  |                     |         |                          
|                 |  |                     |         | Weighted Average          |  | Weighted Average |     |        |  | Weighted Average
|Range of Prices  |  | Number              |         | Remaining Life (in Years) |  | Exercise Prices  |     | Number |  | Exercise Prices 
|                 |  |                     |         |                           |  |                  |     |        |  |                 
|$9.00 to $10.50  |  |                     | 33,333  |                           |  |                  | 9.3 |        |  | $                | 9.00  |  |  |  |       |  |  | $ | 9.00  | 
|$10.53 to $15.21 |  |                     | 113,625 |                           |  |                  | 9.4 |        |  | $                | 15.21 |  |  |  | 37,924 |  |  | $ | 15.21 | 
|$15.24 to $15.66 |  |                     | 7,166   |                           |  |                  | 9.5 |        |  | $                | 15.66 |  |  |  | 2,389  |  |  | $ | 15.66 | 
|                 |  |                     |         |                           |  |                  |     |        |  |                  |       |  |  |  |        |  |  |   |       | 
|                 |  |                     | 154,124 |                           |  |                  | 9.4 |        |  | $                | 13.89 |  |  |  | 40,313 |  |  | $ | 15.24 | 
|                 |  |                     |         |                           |  |                  |     |        |  |                  |       |  |  |  |        |  |  |   |       | 

We account for stock option grants in accordance
with Accounting Principles Board Opinion (APB)
No. 25, Accounting for Stock Issued to
Employees and related interpretations. Under APB
No. 25, if the exercise price of our employee stock options
is equal to the market price of the underlying stock on the date
of grant, no compensation expense is recognized. Under Statement
of Financial Accounting Standard (SFAS)
No. 123, Accounting for Stock-Based
Compensation, (as amended by SFAS No. 148)
compensation cost is measured at the grant date based on the
estimated value of the award and is recognized over the service
(or vesting) period. The income tax benefit, if any, associated
with the exercise of stock options is credited to additional
paid-in capital.

8



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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

|                                                                                                |             |                    |   |                   |   |  |   |         |  
|----------------------------------------------------------------------------------------------- | ----------- | ------------------ | - | ----------------- | - |  | - | ------- | -
|                                                                                                |             |                   
|                                                                                                |             | Three Months Ended
|                                                                                                |             |                   
|                                                                                                |             | March 31, 2004     |   | March 31, 2003(1)
|                                                                                                |             |                    |   |                  
|Loss  continuing operations                                                                    |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    | $ | (6,384            | ) |  | $ | (5,841  | )
|                                                                                                | Pro forma   |                    |   | (6,509            | ) |  |   | (5,841  | )
|Loss from discontinued operations, net of taxes                                                 |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (702              | ) |  |   | (3,243  | )
|                                                                                                | Pro forma   |                    |   | (702              | ) |  |   | (3,243  | )
|Net loss:                                                                                       |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (7,086            | ) |  |   | (9,084  | )
|                                                                                                | Pro forma   |                    |   | (7,211            | ) |  |   | (9,084  | )
|Net loss attributable to common stock                                                           |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (7,086            | ) |  |   | (12,860 | )
|                                                                                                | Pro forma   |                    |   | (7,211            | ) |  |   | (12,860 | )
|Loss from continuing operations attributable to
    common stock before discontinued operations |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (6,384            | ) |  |   | (9,617  | )
|                                                                                                | Pro forma   |                    |   | (6,509            | ) |  |   | (9,617  | )
|Basic and diluted loss per common share:                                                        |             |                    |   |                   |   |  |   |        
|Loss  continuing operations                                                                    |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    | $ | (2.74             | ) |  | $ | (2.50   | )
|                                                                                                | Pro forma   |                    |   | (2.78             | ) |  |   | (2.50   | )
|Loss from discontinued operations, net of taxes                                                 |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (0.30             | ) |  |   | (1.39   | )
|                                                                                                | Pro forma   |                    |   | (0.30             | ) |  |   | (1.39   | )
|Net loss                                                                                        |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (3.04             | ) |  |   | (3.89   | )
|                                                                                                | Pro forma   |                    |   | (3.08             | ) |  |   | (3.89   | )
|Net loss attributable to common stock                                                           |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (3.04             | ) |  |   | (5.51   | )
|                                                                                                | Pro forma   |                    |   | (3.08             | ) |  |   | (5.51   | )
|Loss from continuing operations attributable to
    common stock before discontinued operations |             |                    |   |                   |   |  |   |        
|                                                                                                | As reported |                    |   | (2.74             | ) |  |   | (4.12   | )
|                                                                                                | Pro forma   |                    |   | (2.78             | ) |  |   | (4.12   | )



---



|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(1) | There were no options outstanding between
    January 1, 2003 and March 31, 2003.

9



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|   |                        
|-- | -----------------------
|4. | Discontinued Operations

As discussed above, during 2003, we identified 19
hotels, one office building and three land parcels for sale as
part of our portfolio improvement strategy, and in our efforts
to reduce debt and interest costs. Between November 1, 2003
and May 10, 2004, we sold nine of the nineteen hotels and
the office building for an aggregate sales price of
$48.3 million. From the sale of these assets, we paid down
debt of approximately $35.5 million.

In accordance with SFAS No. 144, we
have included the assets sold during 2003 and 2004 as well as
the assets held for sale at March 31, 2004 (including any
related impairment charges) in Discontinued Operations in the
Consolidated Statements of Operations. The assets held for sale
at March 31, 2004 and December 31, 2003 and the
liabilities related to these assets are separately disclosed in
the Condensed Consolidated Balance Sheets. Where the carrying
values of the assets held for sale exceeded the estimated fair
values, net of selling costs, we reduced the carrying values and
recorded impairment charges. We determine fair values using
quoted market prices, when available, or other accepted
valuation techniques. During the three months ended
March 31, 2004, we recorded impairment charges of
$2.2 million on assets held for sale. Where the estimated
selling prices, net of selling costs, of assets held for sale
exceeded the carrying values, we did not increase the carrying
values of the assets. Among other criteria, we classify an asset
as held for sale if we expect to dispose of it within one year.

At March 31, 2004, 13 hotels and three
land parcels were held for sale. At December 31, 2003,
18 hotels and three land parcels were held for sale. The
following condensed combined table summarizes the assets and
liabilities relating to the properties identified as held for
sale as of March 31, 2004 and December 31, 2003:

|                                          |                   |                          |        |              |  |   |        |        | 
|----------------------------------------- | ----------------- | ------------------------ | ------ | ------------ |  | - | ------ | ------ | 
|                                          |                   | March 31,                |        | December 31,
|                                          |                   | 2004                     |        | 2003        
|                                          |                   |                          |        |             
|                                          |                   |                         
|                                          |                   | (Unaudited in thousands)
|ASSETS                                   
|Accounts receivable, net of allowances    |                   | $                        | 1,066  |              |  | $ | 1,252  |       
|Inventories                               |                   |                          | 1,076  |              |  |   | 1,377  |       
|Prepaid expenses and other current assets |                   |                          | 1,733  |              |  |   | 1,039  |       
|Property and equipment, net               |                   |                          | 49,582 |              |  |   | 61,624 |       
|Other assets                              |                   |                          | 2,331  |              |  |   | 3,275  |       
|                                          |                   |                          |        |              |  |   |        |       
|                                          |                   | $                        | 55,788 |              |  | $ | 68,567 |       
|                                          |                   |                          |        |              |  |   |        |       
|                                         
|LIABILITIES                              
|Accounts payable                          |                   | $                        | 1,199  |              |  | $ | 1,234  |       
|Other accrued liabilities                 |                   |                          | 2,276  |              |  |   | 3,120  |       
|Advance deposits                          |                   |                          | 571    |              |  |   | 390    |       
|Current portion of long-term debt         |                   |                          | 567    |              |  |   | 771    |       
|Long-term debt                            |                   |                          | 42,727 |              |  |   | 52,433 |       
|                                          |                   |                          |        |              |  |   |        |       
|                                          | Total liabilities |                          | $      | 47,340       |  |   | $      | 57,948 | 
|                                          |                   |                          |        |              |  |   |        |       

10



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The condensed combined results of operations of
the properties classified as Discontinued Operations as of
March 31, 2004 were as follows:

|                           |                                   |                          |        |           |       |   |        |       |       | 
|-------------------------- | --------------------------------- | ------------------------ | ------ | --------- | ----- | - | ------ | ----- | ----- | 
|                           |                                   |                         
|                           |                                   | Three Months Ended      
|                           |                                   |                         
|                           |                                   | March 31,                |        | March 31,
|                           |                                   | 2004                     |        | 2003     
|                           |                                   |                          |        |          
|                           |                                   |                         
|                           |                                   | (Unaudited in           
|                           |                                   | thousands)              
|Revenues:                  |                                   |                          |        |           |       |   |        |      
|                           |                                   | Rooms                    |        | $         | 7,944 |   |        | $     | 9,134 | 
|                           |                                   | Food and beverage        |        |           | 2,318 |   |        |       | 2,359 | 
|                           |                                   | Other                    |        |           | 478   |   |        |       | 793   | 
|                           |                                   |                          |        |           |       |   |        |      
|                           |                                   |                          | 10,740 |           |       |   | 12,286 |      
|                           |                                   |                          |        |           |       |   |        |      
|Operating expenses:        |                                   |                          |        |           |       |   |        |      
|                           | Direct:                           |                          |        |           |       |   |        |       |      
|                           |                                   | Rooms                    |        |           | 2,696 |   |        |       | 3,196 | 
|                           |                                   | Food and beverage        |        |           | 1,834 |   |        |       | 2,028 | 
|                           |                                   | Other                    |        |           | 385   |   |        |       | 598   | 
|                           |                                   |                          |        |           |       |   |        |      
|                           |                                   |                          | 4,915  |           |       |   | 5,822  |      
|                           |                                   |                          |        |           |       |   |        |      
|                           |                                   |                          | 5,825  |           |       |   | 6,464  |      
|Other operating expenses:  |                                   |                          |        |           |       |   |        |      
|                           | General, administrative and other |                          |        | 6,063     |       |   |        | 7,750 |      
|                           | Depreciation and amortization     |                          |        | 133       |       |   |        | 1,447 |      
|                           | Impairment of long-lived assets   |                          |        | 2,153     |       |   |        |      |      
|                           |                                   |                          |        |           |       |   |        |      
|                           |                                   | Other operating expenses |        |           | 8,349 |   |        |       | 9,197 | 
|                           |                                   |                          |        |           |       |   |        |      
|                           |                                   |                          | (2,524 | )         |       |   | (2,733 | )    
|Interest expense           |                                   |                          | (1,185 | )         |       |   | (510   | )    
|Gain on asset dispositions |                                   |                          | 3,007  |           |       |   |       |      
|                           |                                   |                          |        |           |       |   |        |      
|Loss before income taxes   |                                   |                          | (702   | )         |       |   | (3,243 | )    
|Provision for income taxes |                                   |                          |       |           |       |   |       |      
|                           |                                   |                          |        |           |       |   |        |      
|Net loss                   |                                   | $                        | (702   | )         |       | $ | (3,243 | )    
|                           |                                   |                          |        |           |       |   |        |      



|   |                 
|-- | ----------------
|5. | Cash, Restricted

Our restricted cash as of March 31, 2004
consists of amounts reserved for letter of credit collateral, a
deposit required by our bankers and cash reserved pursuant to
certain loan agreements.

11



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|   |               
|-- | --------------
|6. | Loss Per Share

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

|                                  |                                          |                                                                                                 |  |           |        |   |  |   |         |  
|--------------------------------- | ---------------------------------------- | ----------------------------------------------------------------------------------------------- |  | --------- | ------ | - |  | - | ------- | -
|                                  |                                          |                                                                                                
|                                  |                                          | Three Months Ended                                                                             
|                                  |                                          |                                                                                                
|                                  |                                          | March 31,                                                                                       |  | March 31,
|                                  |                                          | 2004                                                                                            |  | 2003     
|                                  |                                          |                                                                                                 |  |          
|                                  |                                          |                                                                                                
|                                  |                                          | (Unaudited in                                                                                  
|                                  |                                          | thousands, except per                                                                          
|                                  |                                          | share data)                                                                                    
|Basic and diluted loss per share: |                                          |                                                                                                 |  |           |        |   |  |  
|                                  | Numerator:                               |                                                                                                 |  |           |        |   |  |   |        
|                                  |                                          | Loss  continuing operations                                                                    |  | $         | (6,384 | ) |  | $ | (5,841  | )
|                                  |                                          | Loss from discontinued operations, net of taxes                                                 |  |           | (702   | ) |  |   | (3,243  | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  |                                          | Net loss                                                                                        |  |           | (7,086 | ) |  |   | (9,084  | )
|                                  |                                          | Preferred stock dividend                                                                        |  |           |       |   |  |   | (3,776  | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  |                                          | Net loss attributable to common stock                                                           |  |           | (7,086 | ) |  |   | (12,860 | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  |                                          | Loss  continuing operations                                                                    |  |           | (6,384 | ) |  |   | (5,841  | )
|                                  |                                          | Preferred stock dividend                                                                        |  |           |       |   |  |   | (3,776  | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  |                                          | Loss from continuing operations attributable to
    common stock before discontinued operations |  | $         | (6,384 | ) |  | $ | (9,617  | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  | Denominator:                             |                                                                                                 |  |           |        |   |  |   |        
|                                  |                                          | Denominator for basic and diluted loss per
    share  weighted-average shares                  |  |           | 2,334  |   |  |   | 2,333   |  
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  | Basic and diluted loss per common share: |                                                                                                 |  |           |        |   |  |   |        
|                                  |                                          | Loss  continuing operations                                                                    |  | $         | (2.74  | ) |  | $ | (2.50   | )
|                                  |                                          | Loss from discontinued operations, net of taxes                                                 |  |           | (0.30  | ) |  |   | (1.39   | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  |                                          | Net loss                                                                                        |  |           | (3.04  | ) |  |   | (3.89   | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  |                                          | Net loss attributable to common stock                                                           |  |           | (3.04  | ) |  |   | (5.51   | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  
|                                  |                                          | Loss from continuing operations attributable to
    common stock before discontinued operations |  | $         | (2.74  | ) |  | $ | (4.12   | )
|                                  |                                          |                                                                                                 |  |           |        |   |  |  

We did not include the shares associated with the
assumed conversion of the restricted stock units
(66,666 shares) or the exercise of stock options (options
to acquire 154,124 shares of common stock) and A and
B warrants (rights to acquire 503,546 and
343,122 shares of common stock, respectively) in the
computation of diluted loss per share for the period ended
March 31, 2004 because their inclusion would have been
antidilutive. We did not include the shares associated with the
exercise of the A and B warrants (rights to acquire 503,546
and 343,122 shares of common stock, respectively) in the
computation of diluted loss per share for the period ended
March 31, 2003 because their inclusion would have been
antidilutive.

12



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|   |                          
|-- | -------------------------
|7. | Other Accrued Liabilities

At March 31, 2004 and December 31,
2003, other accrued liabilities consisted of the following:

|                                 |  |                          |        |                   |  |   |        | 
|-------------------------------- |  | ------------------------ | ------ | ----------------- |  | - | ------ | 
|                                 |  | March 31, 2004           |        | December 31, 2003
|                                 |  |                          |        |                  
|                                 |  |                         
|                                 |  | (Unaudited in thousands)
|Salaries and related costs       |  | $                        | 17,760 |                   |  | $ | 16,211 | 
|Property and sales taxes         |  |                          | 10,950 |                   |  |   | 9,427  | 
|Professional fees                |  |                          | 420    |                   |  |   | 570    | 
|Provision for state income taxes |  |                          | 320    |                   |  |   | 2,361  | 
|Franchise fee accrual            |  |                          | 1,667  |                   |  |   | 1,115  | 
|Accrued interest                 |  |                          | 491    |                   |  |   | 526    | 
|Accrual for allowed claims       |  |                          | 179    |                   |  |   | 186    | 
|Other                            |  |                          | 614    |                   |  |   | 1,036  | 
|                                 |  |                          |        |                   |  |   |        | 
|                                 |  | $                        | 32,401 |                   |  | $ | 31,432 | 
|                                 |  |                          |        |                   |  |   |        | 



|   |     
|-- | ----
|8. | Debt

Substantially all of our property and equipment
are pledged as collateral for long-term obligations. Certain of
our mortgage notes are subject to a prepayment or yield
maintenance penalty if we repay them prior to their maturity.
Set forth below, by debt pool, is a summary of our debt at
March 31, 2004 along with the applicable interest rates and
the related carrying values of the property, plant and equipment
which collateralize these debts:

|                 |                                                      |           |  |                          |  |             |   |          |  |  |   |         |  |  |                                    
|---------------- | ---------------------------------------------------- | --------- |  | ------------------------ |  | ----------- | - | -------- |  |  | - | ------- |  |  | -----------------------------------
|                 |                                                      |           |  |                          |  |            
|                 |                                                      |           |  | March 31, 2004           |  |            
|                 |                                                      |           |  |                          |  |            
|                 |                                                      | Number    |  | Property, Plant          |  | Debt        |   | Interest
|                 |                                                      | of Hotels |  | and Equipment, net       |  | Obligations |   | Rates   
|                 |                                                      |           |  |                          |  |             |   |         
|                 |                                                      |           |  | (1)                      |  | (1)         |   |         
|                 |                                                      |           |  |                          |  |            
|                 |                                                      |           |  | (Unaudited in thousands) |  |            
|Exit financing   |                                                      |           |  |                          |  |             |   |          |  |  |   |         |  | 
|                 | Merrill Lynch Mortgage Lending, Inc. 
    Senior    |           |  |                          |  |             |   |          |  |  | $ | 210,160 |  |  | LIBOR plus 2.36%                   
|                 | Merrill Lynch Mortgage Lending, Inc. 
    Mezzanine |           |  |                          |  |             |   |          |  |  |   | 81,010  |  |  | LIBOR plus 8.79%                   
|                 |                                                      |           |  |                          |  |             |   |          |  |  |   |         |  | 
|                 | Merrill Lynch Mortgage Lending, Inc. 
    Total     |           |  | 53                       |  |             | $ | 391,249  |  |  |   | 291,170 |  |  |                                    
|                 | Computershare Trust Company of Canada                |           |  | 1                        |  |             |   | 13,874   |  |  |   | 7,391   |  |  | 7.88%                              
|Lehman financing |                                                      |           |  |                          |  |             |   |          |  |  |   |         |  | 
|                 | Lehman Brothers Holdings, Inc.                       |           |  | 15                       |  |             |   | 65,141   |  |  |   | 71,071  |  |  | Higher of LIBOR plus 5.25% or 7.25%
|Other financing  |                                                      |           |  |                          |  |             |   |          |  |  |   |         |  | 
|                 | Column Financial, Inc.                               |           |  | 9                        |  |             |   | 61,505   |  |  |   | 26,761  |  |  | 10.59%                             
|                 | Lehman Brothers Holdings, Inc.                       |           |  | 5                        |  |             |   | 37,976   |  |  |   | 23,292  |  |  | $16,414 at 9.40%; $6,878 at 8.90%  
|                 | JP Morgan Chase Bank                                 |           |  | 2                        |  |             |   | 8,806    |  |  |   | 10,516  |  |  | 7.25%                              
|                 | DDL Kinser                                           |           |  | 1                        |  |             |   | 3,166    |  |  |   | 2,360   |  |  | 8.25%                              
|                 | First Union Bank                                     |           |  | 1                        |  |             |   | 4,353    |  |  |   | 3,345   |  |  | 9.38%                              
|                 | Column Financial, Inc.                               |           |  | 1                        |  |             |   | 7,762    |  |  |   | 8,847   |  |  | 9.45%                              

13



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |         |                 
|------------------------------------- | ----------------------------------------------------------------- | --------- | --- | ------------------------ |  | ----------- | ------- | -------- |  | - | ------- | ------ |  | ------- | ----------------
|                                      |                                                                   |           |     |                          |  |            
|                                      |                                                                   |           |     | March 31, 2004           |  |            
|                                      |                                                                   |           |     |                          |  |            
|                                      |                                                                   | Number    |     | Property, Plant          |  | Debt        |         | Interest
|                                      |                                                                   | of Hotels |     | and Equipment, net       |  | Obligations |         | Rates   
|                                      |                                                                   |           |     |                          |  |             |         |         
|                                      |                                                                   |           |     | (1)                      |  | (1)         |         |         
|                                      |                                                                   |           |     |                          |  |            
|                                      |                                                                   |           |     | (Unaudited in thousands) |  |            
|                                      | Column Financial, Inc.                                            |           |     | 1                        |  |             |         | 6,082    |  |   |         | 3,173  |  |         | 10.74%          
|                                      | Robb Evans, Trustee                                               |           |     | 1                        |  |             |         | 6,661    |  |   |         | 6,958  |  |         | Prime plus 4.00%
|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        
|                                      | Total  other financing                                           |           |     | 21                       |  |             |         | 136,311  |  |   |         | 85,252 |  |         |                 
|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        
|                                      |                                                                   |           | 90  |                          |  |             | 606,575 |          |  |   | 454,884 |        |  | 6.4%(2)
|Long-term debt 
    other            |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        
|                                      | Deferred interest  long-term                                     |           |     |                         |  |             |         |         |  |   |         | 4,288  |  |         |                 
|                                      | Deferred rent on a long-term ground lease                         |           |     |                         |  |             |         |         |  |   |         | 2,549  |  |         |                 
|                                      | Tax notes issued pursuant to our Joint Plan of
    Reorganization |           |     |                         |  |             |         |         |  |   |         | 4,014  |  |         |                 
|                                      | Other                                                             |           |     |                         |  |             |         |         |  |   |         | 574    |  |         |                 
|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        
|                                      |                                                                   |           |    |                          |  |             |        |          |  |   | 11,425  |        |  |        
|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        
|Property, plant and equipment  other |                                                                   |           |    |                          |  |             | 4,468   |          |  |   |        |        |  |        
|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        
|                                      |                                                                   |           | 90  |                          |  |             | 611,043 |          |  |   | 466,309 |        |  |        
|Held for sale                         |                                                                   |           | (13 | )                        |  |             | (49,582 | )        |  |   | (43,294 | )      |  |        
|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        
|Total March 31, 2004                  |                                                                   |           | 77  |                          |  | $           | 561,461 |          |  | $ | 423,015 |        |  |        
|                                      |                                                                   |           |     |                          |  |             |         |          |  |   |         |        |  |        



---



|    |                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Debt obligations and property, plant and
    equipment of one hotel in which we have a non-controlling equity
    interest that we do not consolidate are excluded from the table
    above.
|   
|(2) | The 6.4% in the table above represents our annual
    weighted average cost of debt at March 31, 2004.                                                                                      



| |               
| | --------------
| | Exit Financing

The Merrill Lynch Mortgage senior and mezzanine
debt agreements provide that when either (i) the debt yield
for the trailing 12-month period is below 13.25% during year
ending November 2004 (and if the loan is extended, 13.50%,
13.75% and 14.00% during each of the next three years of the
loan, respectively) or (ii) the debt service coverage ratio
is below 1.20x, excess cash flows produced by the mortgaged
hotels (after payment of operating expenses, management fees,
required reserves, loan service fees, principal and interest)
must be deposited in a restricted cash account. These funds can
be used for the prepayment of aggregate outstanding borrowings,
capital expenditures reasonably approved by the lender, and up
to an aggregate of $3.0 million of scheduled principal and
interest payments due under these agreements. Funds would no
longer be deposited into the restricted cash account if the debt
yield and the debt service coverage ratio are sustained above
the minimum requirements for three consecutive months. On
March 31, 2003, the debt yield for the hotels securing the
debt fell below the then applicable 12.75% minimum threshold
and, therefore, the excess cash flow produced by the hotels
securing the debt was retained in the restricted cash account
starting on May 1, 2003. Between the inception date of the
loan and May 10, 2004, $9.1 million was released from
the restricted cash account for capital expenditures and
scheduled interest and principal payments. As of May 10,
2004, $3.4 million was being retained in the restricted
cash account. At March 31, 2004, the debt yield and debt
service coverage ratios remained below the minimum requirements.
Further, the mezzanine debt agreement with Merrill Lynch
Mortgage requires that we maintain a minimum net worth of at
least $10.0 million which we currently meet.

14



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



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

On September 30, 2003, first mortgage debt
of approximately $7.0 million of MHA became due. We own 60%
of MHA, and MHAs sole asset is the Crowne Plaza Hotel in
Macon, Georgia. The lender initially agreed to extend the term
of the debt to December 31, 2003, and then to June 30,
2004, while we explore alternative financing opportunities. We
have escrowed foreclosure documents that will allow the lender
to foreclose on the property on June 30, 2004 if we have
not repaid the mortgage debt by that date. There can be no
assurance that we will complete a refinancing on or before the
due date or that the lender will grant further extensions. If we
are not able to refinance the debt and the lender does not grant
further extensions, the property would be subject to
foreclosure. A foreclosure on the property would constitute a
default of the franchise agreement; therefore, we may be liable
for $0.9 million in liquidated damages under the franchise
agreement. Total revenues for this hotel were $1.4 million
for the three months ended March 31, 2004 and also for the
three months ended March 31, 2003. The debt of
approximately $7.0 million is included in the current
portion of long-term debt in our consolidated balance sheet as
of March 31, 2004.



|   |                              
|-- | -----------------------------
|9. | Commitments and Contingencies



| |                                                 
| | ------------------------------------------------
| | Franchise Agreement and Capital
    Expenditures

We benefit from the superior brand qualities of
the Crowne Plaza, Holiday Inn, Marriott, Hilton and other
brands, including the reputation of these brands, reservation
bookings through their central reservation systems, global
distribution systems, guest loyalty program and brand Internet
booking sites. Reservations made by means of these franchisor
facilities generally account for approximately 30% of our total
reservations.

To obtain these franchise affiliations, we enter
into franchise agreements with hotel franchisors that generally
have terms of between 10 and 20 years. The franchise
agreements typically authorize us to operate the hotel under the
franchise name, at a specific location or within a specified
area, and require that we operate a hotel in accordance with the
standards specified by the franchisor. As part of our franchise
agreements, we are generally required to pay a royalty fee, an
advertising/marketing fee, a fee for the use of the
franchisors nationwide reservation system and certain
ancillary charges. Royalty fees generally range from 3.0% to
6.0% of gross room revenues, advertising/marketing fees
generally range from 1.0% to 4.0% of gross room revenues and
reservation system fees generally range from 1.0% to 2.0% of
gross room revenues. In the aggregate, royalty fees,
advertising/marketing fees and reservation fees for the various
brands under which we operate our hotels range from 5.0% to
12.0% of gross room revenues.

These costs vary with revenues and are not fixed
commitments. Franchise fees incurred for the three months ended
March 31, 2004 and 2003 were as follows:

|                        |  |                          |       |                |  |   |       | 
|----------------------- |  | ------------------------ | ----- | -------------- |  | - | ----- | 
|                        |  |                         
|                        |  | Three Months Ended      
|                        |  |                         
|                        |  | March 31, 2004           |       | March 31, 2003
|                        |  |                          |       |               
|                        |  |                         
|                        |  | (Unaudited in thousands)
|Continuing operations   |  | $                        | 5,250 |                |  | $ | 4,780 | 
|Discontinued operations |  |                          | 588   |                |  |   | 725   | 
|                        |  |                          |       |                |  |   |       | 
|                        |  | $                        | 5,838 |                |  | $ | 5,505 | 
|                        |  |                          |       |                |  |   |       | 

During the term of the franchise agreements, the
franchisors may require us to upgrade facilities to comply with
their current standards. Our current franchise agreements
terminate at various times and have differing remaining terms,
for example, the terms of 5, 13 and 9 of our franchise
agreements are scheduled to expire in 2004, 2005, and 2006,
respectively. As franchise agreements expire, we may apply for a
franchise renewal. In connection with renewals, the franchisor
may require payment of a renewal fee,

15



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

increased royalty and other recurring fees and
substantial renovation of the facilities, or the franchisor may
elect not to renew the franchise. The costs incurred in
connection with these agreements are primarily monthly payments
due to the franchisors based on a percentage of room revenues.

If we do not comply with the terms of a franchise
agreement, following notice and an opportunity to cure, the
franchisor has the right to terminate the agreement, which could
lead to a default under one or more of our loan agreements which
could materially and adversely affect us. Prior to terminating a
franchise agreement, franchisors are required to notify us of
the areas of non-compliance and give us the opportunity to cure
the non-compliance. In the past, we have been able to cure most
cases of non-compliance and most defaults within the cure
periods, and those events of non-compliance and defaults did not
cause termination of our franchises or defaults on our loan
agreements. If we perform an economic analysis of the hotel and
determine that it is not economically feasible to comply with a
franchisors requirements, we will either select an
alternative franchisor or operate the hotel without a franchise
affiliation.

As of May 10, 2004, we have been notified
that we were not in compliance with some of the terms of eight
of our franchise agreements and have received default and
termination notices from franchisors with respect to an
additional three hotels. We cannot assure you that we will be
able to complete our action plans (which we estimate will cost
approximately $3.8 million) to cure the alleged defaults
prior to the specified termination dates or be granted
additional time in which to cure any defaults. We are not aware
of any other instances of non-compliance with our franchise
agreements.

In addition, as part of our bankruptcy
reorganization proceedings, we entered into stipulations with
each of our major franchisors setting forth a timeline for
completion of capital expenditures for some of our hotels.
However, as of May 10, 2004, we have not completed the
required capital expenditures for 32 hotels in accordance
with the stipulations and estimate that completing those
improvements will cost $24.6 million. Under the
stipulations, the applicable franchisors could therefore seek to
declare certain franchise agreements in default and, in certain
circumstances, seek to terminate the franchise agreement.

We believe that we will cure the non-compliance
and defaults on these hotels before the applicable termination
dates, but we cannot provide assurance that we will be able to
do so or that we will be able to obtain additional time in which
to do so. If a franchise agreement is terminated, we will either
select an alternative franchisor or operate the hotel
independently of any franchisor. However, terminating or
changing the franchise affiliation of a hotel could require us
to incur significant expenses, including liquidated damages, and
capital expenditures.

To comply with the requirements of our
franchisors and to improve our competitive position in the
individual markets, we plan to enhance our capital improvement
program in 2004.



| |                  
| | -----------------
| | Letters of Credit

As of March 31, 2004, we had issued two
irrevocable letters of credit totaling $3.6 million as
guarantees to Zurich American Insurance Company and Donlen Fleet
Management Services. These letters of credit will expire in
November 2004 but may require renewal beyond that date. All
letters of credit are fully collateralized by our cash
(classified as restricted cash in the accompanying Condensed
Consolidated Balance Sheets).



| |               
| | --------------
| | Self-insurance

We are self-insured up to certain limits with
respect to employee medical, employee dental, property
insurance, general liability insurance, personal injury claims,
workers compensation and auto liability. We establish
liabilities for these self-insured obligations annually, based
on actuarial valuations and our history of claims. Should
unanticipated events cause these claims to escalate beyond
normal expectations, our

16



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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

financial condition and results of operations
would be negatively impacted. As of March 31, 2004, and
December 31, 2003, we had approximately $10.3 million
and $10.0 million accrued for these liabilities,
respectively.

There are other types of losses for which we
cannot obtain insurance at all or at a reasonable cost,
including losses caused by acts of war. If an uninsured loss or
a loss that exceeds our insurance limits were to occur, we could
lose both the revenues generated from the affected hotel and the
capital that we have invested. We also could be liable for any
outstanding mortgage indebtedness or other obligations related
to the hotel. Any such loss could materially and adversely
affect our financial condition and results of operations.

We believe that we maintain sufficient insurance
coverage for the operation of our business.



| |           
| | ----------
| | Litigation

From time to time, as we conduct our business,
legal actions and claims are brought against us. The outcome of
these matters is uncertain. However, we believe that all
currently pending matters will be resolved without a material
adverse effect on our results of operations or financial
condition. Claims relating to the period before we filed for
Chapter 11 protection are limited to the amounts approved
by the Bankruptcy Court for settlement of such claims and are
payable out of the disputed claims reserves provided for in our
plans of reorganization, which in the case of the Joint Plan of
Reorganization, consists of our securities, and in the case of
the Impac Plan of Reorganization, consists of $0.1 million
of cash as of March 31, 2004. We have reserved for all
claims approved by the Bankruptcy Court which have not yet been
paid.



|    |                              
|--- | -----------------------------
|10. | New Accounting Pronouncements

On July 1, 2003, in accordance with
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity, we reclassified the Preferred Stock to the
liability section of the consolidated balance sheet and began
presenting the related dividends in interest expense. Prior to
the adoption of SFAS No. 150, we presented the
Preferred Stock between liabilities and equity in our
consolidated balance sheet (called the mezzanine
section) and reported the Preferred Stock dividend as a
deduction from retained earnings with no effect on our results
of operations. In accordance with SFAS No. 150, the
Preferred Stock and the dividends for the period prior to
July 1, 2003, have not been reclassified. Thus the
Preferred Stock dividend for the three months ended
March 31, 2004 of $4.3 million is presented as part of
interest expense while the Preferred Stock dividend for the
three months ended March 31, 2003 of $3.8 million is
presented as a deduction from retained earnings.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable Interest
Entities (FIN 46), to address perceived
weaknesses in accounting for entities commonly known as
special-purpose or off-balance-sheet. In addition to numerous
FASB Staff Positions written to clarify and improve the
application of FIN 46, the FASB recently announced a
deferral for certain entities, and an amendment to FIN 46
entitled FASB Interpretation No. 46 (revised December
2003), Consolidation of Variable Interest Entities
(FIN 46R). FIN 46 establishes
consolidation criteria for entities for which
control is not easily discernible under Accounting
Research Bulletin 51, Consolidated Financial Statements,
which is based on the premise that holders of the equity of an
entity, control the entity by virtue of voting rights.
FIN 46 provides guidance for identifying the party with a
controlling financial interest resulting from arrangements or
financial interests rather than from voting interests.
FIN 46 defines the term variable interest
entity (VIE) and is based on the premise that
if a business enterprise absorbs a majority of the VIEs
expected losses and/or receives a majority of its expected
residual returns (measure of risk and reward), that enterprise
(the primary beneficiary) has a controlling financial interest
in the VIE. The assets, liabilities, and results of the
activities of the VIE should be included in the

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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

consolidated financial statements of the primary
beneficiary. We were required to adopt the provisions of
FIN 46R relating to any interests in special-purpose
entities (SPEs) as of December 31, 2003. In addition,
during the first quarter of 2004, we were required to apply the
provisions of FIN 46R to any other entities falling within its
scope. The adoption of FIN 46 and the counterpart revision
(FIN 46R) has not had and is not expected to have a
material impact on our financial position and results of
operations.



|    |                           
|--- | --------------------------
|11. | Related Party Transactions

Richard Cartoon, our Executive Vice President and
Chief Financial Officer between October 4, 2001 and
October 13, 2003, is a principal in a business which we
retained in October 2001 to provide Richard Cartoons
services as Chief Financial Officer and other restructuring
support and services. In addition to amounts paid for Richard
Cartoons services as Chief Financial Officer, we were
billed $28,000 and $52,000, including expenses, for other
support and services provided by associates of Richard Cartoon,
LLC for the three months ended March 31, 2004 and 2003,
respectively. Richard Cartoon, LLC may continue to provide
restructuring support and services in the short-term.



|    |                  
|--- | -----------------
|12. | Subsequent Events

As previously discussed, between November 1,
2003 and May 10, 2004, we sold an office building and nine
of the hotels identified for sale. One of these hotels was sold
in 2003, five were sold in the first quarter of 2004 and three
were sold subsequent to the first quarter 2004. Summarized below
is certain financial data relating to the three hotels sold
between April 1, 2004 and May 10, 2004:

|                                                                                                                                     |  |                          |        | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ------ | 
|                                                                                                                                     |  | (Unaudited in thousands)
|                                                                                                                                     |  |                         
|Aggregate sales price                                                                                                                |  | $                        | 20,678 | 
|Carrying value of property, plant and equipment
    at March 31, 2004                                                                |  |                          | 14,553 | 
|Debt paid down from sales proceeds                                                                                                   |  |                          | 18,141 | 
|Total revenues for the three months ended
    March 31, 2004 ($2.6 million for the three months
    ended March 31, 2003)            |  |                          | 2,793  | 
|Direct operating expenses for the three months
    ended March 31, 2004 ($1.2 million for the three
    months ended March 31, 2003) |  |                          | 1,153  | 

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##### Table of Contents



PART II  OTHER INFORMATION






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

(a) A list of the exhibits required to be
filed as part of this Report on Form 10-Q/A, 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 Form 8-K was filed on March 11, 2004
announcing the filing of a Registration Statement with the
Securities and Exchange Commission regarding a public offering
of $175 million of common stock.

A Form 8-K was filed on February 12,
2004 announcing our annual meeting which was held on
April 8, 2004.

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##### Table of Contents






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.                                                        
|                   
|                    |  | By: /s/ W. THOMAS PARRINGTON                                         
|                    |  |                                                                      
|Date:
June 30, 2004 |  | W. Thomas ParringtonPresident and Chief Executive Officer            
|                    |  | By: /s/ MANUEL ARTIME                                                
|                    |  |                                                                      
|Date:
June 30, 2004 |  | Manuel ArtimeExecutive Vice President and
    Chief Financial Officer

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INDEX TO EXHIBITS

|        |      |  |  |             |  |                                                                  
|------- | ---- |  |  | ----------- |  | -----------------------------------------------------------------
|Exhibit |      |  |  |            
|No.     |      |  |  | Description
|        |      |  |  |            
|        | 31.1 |  |  |            |  | Sarbanes  Oxley Section 302
    certification by the CEO        
|        | 31.2 |  |  |            |  | Sarbanes  Oxley Section 302
    certification by the CFO        
|        | 32   |  |  |            |  | Sarbanes  Oxley Section 906
    certification by the CEO and CFO

21