##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q

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

For the Period ended March 31, 2003

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   x   
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   x

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   x   
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 May 9, 2003
|       |  |                              
|Common |  | 6,682,667                    





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TABLE OF CONTENTS



|                                                     |                                                                                               |                                                          |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                      
|                                                     | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                     |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                   
|                                                     |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS         
|                                                     |                                                                                               | CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
|                                                     |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                                                     |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
|                                                     | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                     | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                     | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION                         
|                                                     | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                                     | ITEM 2. CHANGES IN SECURITIES                                                                
|                                                     | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                          
|Form of Sarbanes-Oxley Section 302 (a) Certification
|Form of Sarbanes-Oxley Section 302 (a) Certification
|INDEX TO EXHIBITS                                   
|EX-10.56 ORDER FOR IMPAC PLAN OF REORGANIZATION     
|EX-10.57 IMPAC PLAN OF REORGANIZATION               
|EX-10.58 DISCLOSURE STATEMENT FOR IMPAC PLAN        
|EX-99.1 SECTION 906 CETIFICATION OF THE CEO         
|EX-99.2 SECTION 906 CETIFICATION OF THE CFO         



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##### Table of Contents



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

|                                                                                              |                                                                                                                                                                       |  |      |   | 
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | 
|                                                                                              |                                                                                                                                                                       |  | Page
|                                                                                              |                                                                                                                                                                       |  |     
|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                                                                                       |  |      |  
|Item 1. Financial Statements:                                                                 |                                                                                                                                                                       |  |      |  
|                                                                                              | Condensed Consolidated Balance Sheets as of March 31, 2003
and December 31, 2002 (unaudited)                                                                          |  |      | 1 | 
|                                                                                              | Condensed Consolidated Statements of Operations for the Successor
Three Months Ended March 31, 2003 and the Predecessor Three
months Ended March 31, 2002 (unaudited) |  |      | 2 | 
|                                                                                              | Condensed Consolidated Statement of Stockholders Equity
for the Successor Three Months Ended March 31, 2003 (unaudited)                                              |  |      | 3 | 
|                                                                                              | Condensed Consolidated Statements of Cash Flows for the Successor
Three Months Ended March 31, 2003 and the Predecessor Three
Months Ended March 31, 2002 (unaudited) |  |      | 4 | 
|                                                                                              | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                                                      |  |      | 5 | 
|Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                                                                                                       |  | 13   |  
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                                                                                       |  | 22   |  
|Item 4. Controls and Procedures                                                               |                                                                                                                                                                       |  | 22   |  
|PART II. OTHER INFORMATION                                                                    |                                                                                                                                                                       |  |      |  
|Item 1. Legal Proceedings                                                                     |                                                                                                                                                                       |  | 23   |  
|Item 2. Changes in Securities                                                                 |                                                                                                                                                                       |  | 23   |  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                                                                       |  | 24   |  
|Signatures                                                                                    |                                                                                                                                                                       |  | 25   |  
|Certifications                                                                                |                                                                                                                                                                       |  | 26   |  





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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, 2003           |         | December 31, 2002
|                                                         |                                                                                              |                                   |                            |         |                          |         |                  
|                                                         |                                                                                              |                                   |                            |         | (Unaudited in thousands,
|                                                         |                                                                                              |                                   |                            |         | except per share data)  
|ASSETS                                                   |                                                                                              |                                   |                            |         |                          |         |                   |        
|Current assets:                                          |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         | Cash and cash equivalents                                                                    |                                   | $                          | 9,952   |                          |         | $                 | 10,875  |       
|                                                         | Cash, restricted                                                                             |                                   |                            | 11,797  |                          |         |                   | 19,384  |       
|                                                         | Accounts receivable (net of allowances: 2003 - $1,629; 2002 - $1,594)                        |                                   |                            | 12,549  |                          |         |                   | 10,681  |       
|                                                         | Inventories                                                                                  |                                   |                            | 6,586   |                          |         |                   | 7,197   |       
|                                                         | Prepaid expenses and other current assets                                                    |                                   |                            | 11,670  |                          |         |                   | 15,118  |       
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         |                                                                                              |                                   | Total current assets       |         |                          | 52,554  |                   |         |        | 63,255  | 
|Property and equipment, net                              |                                                                                              |                                   | 652,756                    |         |                          |         | 664,565           |        
|Deposits for capital expenditures                        |                                                                                              |                                   | 15,133                     |         |                          |         | 21,309            |        
|Other assets                                             |                                                                                              |                                   | 13,257                     |         |                          |         | 13,535            |        
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         |                                                                                              | $                                 | 733,700                    |         |                          | $       | 762,664           |        
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)           |                                                                                              |                                   |                            |         |                          |         |                   |        
|Liabilities not subject to compromise                    |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         | Current liabilities:                                                                         |                                   |                            |         |                          |         |                   |         |       
|                                                         |                                                                                              | Accounts payable                  |                            | $       | 13,703                   |         |                   | $       | 12,380 |        
|                                                         |                                                                                              | Other accrued liabilities         |                            |         | 38,977                   |         |                   |         | 44,125 |        
|                                                         |                                                                                              | Advance deposits                  |                            |         | 3,002                    |         |                   |         | 1,786  |        
|                                                         |                                                                                              | Current portion of long-term debt |                            |         | 14,618                   |         |                   |         | 14,550 |        
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         |                                                                                              |                                   | Total current liabilities  |         |                          | 70,300  |                   |         |        | 72,841  | 
|Long-term debt                                           |                                                                                              |                                   | 386,356                    |         |                          |         | 387,424           |        
|Liabilities subject to compromise                        |                                                                                              |                                   | 76,994                     |         |                          |         | 93,816            |        
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         |                                                                                              |                                   | Total liabilities          |         |                          | 533,650 |                   |         |        | 554,081 | 
|Minority interests                                       |                                                                                              |                                   | 3,760                      |         |                          |         | 3,616             |        
|Commitments and contingencies                            |                                                                                              |                                   |                            |         |                          |         |                   |        
|Mandatorily redeemable 12.25% cumulative preferred stock |                                                                                              |                                   | 130,286                    |         |                          |         | 126,510           |        
|Stockholders equity (deficit):                          |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         | Common stock, $.01 par value, 30,000,000 shares authorized;
7,000,000 issued and outstanding |                                   |                            | 70      |                          |         |                   | 70      |       
|                                                         | Additional paid-in capital                                                                   |                                   |                            | 89,223  |                          |         |                   | 89,223  |       
|                                                         | Accumulated deficit                                                                          |                                   |                            | (23,696 | )                        |         |                   | (10,836 | )     
|                                                         | Accumulated other comprehensive income                                                       |                                   |                            | 407     |                          |         |                   |        |       
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         |                                                                                              |                                   | Total stockholders equity |         |                          | 66,004  |                   |         |        | 78,457  | 
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        
|                                                         |                                                                                              | $                                 | 733,700                    |         |                          | $       | 762,664           |        
|                                                         |                                                                                              |                                   |                            |         |                          |         |                   |        

See notes to condensed consolidated financial statements.

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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |        |        | 
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------- | ------------------------ | ------ | -------------- | ------- | ------ | ------ | 
|                                                   |                                                                                                                                                    |                          |         | Three months ended      
|                                                   |                                                                                                                                                    |                          |         |                         
|                                                   |                                                                                                                                                    |                          |         | March 31, 2003           |        | March 31, 2002
|                                                   |                                                                                                                                                    |                          |         |                          |        |               
|                                                   |                                                                                                                                                    |                          |         | (Unaudited in thousands,
|                                                   |                                                                                                                                                    |                          |         | except per share data)  
|                                                   |                                                                                                                                                    |                          |         | Successor                |        | Predecessor   
|Revenues:                                          |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   | Rooms                                                                                                                                              |                          | $       | 62,994                   |        |                | $       | 66,143 |       
|                                                   | Food and beverage                                                                                                                                  |                          |         | 18,951                   |        |                |         | 19,436 |       
|                                                   | Other                                                                                                                                              |                          |         | 3,564                    |        |                |         | 4,240  |       
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   |                                                                                                                                                    |                          | 85,509  |                          |        |                | 89,819  |       
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Operating expenses:                                |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   | Direct:                                                                                                                                            |                          |         |                          |        |                |         |        |       
|                                                   |                                                                                                                                                    | Rooms                    |         |                          | 18,639 |                |         |        | 18,496 | 
|                                                   |                                                                                                                                                    | Food and beverage        |         |                          | 13,734 |                |         |        | 14,493 | 
|                                                   |                                                                                                                                                    | Other                    |         |                          | 2,530  |                |         |        | 2,735  | 
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   |                                                                                                                                                    |                          | 34,903  |                          |        |                | 35,724  |       
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   |                                                                                                                                                    | Gross contribution       |         |                          | 50,606 |                |         |        | 54,095 | 
|General, administrative and other                  |                                                                                                                                                    |                          | 42,519  |                          |        |                | 39,398  |       
|Depreciation and amortization                      |                                                                                                                                                    |                          | 8,870   |                          |        |                | 13,460  |       
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   |                                                                                                                                                    | Other operating expenses |         |                          | 51,389 |                |         |        | 52,858 | 
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   |                                                                                                                                                    |                          | (783    | )                        |        |                | 1,237   |       
|Other income (expenses):                           |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   | Interest income and other                                                                                                                          |                          |         | 83                       |        |                |         | 181    |       
|                                                   | Interest expense and other (contractual
interest: $7.7 million and $16.5 million
for the three months ended March 31, 2003 and 2002, respectively) |                          |         | (6,937                   | )      |                |         | (8,962 | )     
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Loss before income taxes and reorganization items  |                                                                                                                                                    |                          | (7,637  | )                        |        |                | (7,544  | )     
|Reorganization items                               |                                                                                                                                                    |                          | (1,237  | )                        |        |                | (5,827  | )     
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Loss before income taxes  continuing operations   |                                                                                                                                                    |                          | (8,874  | )                        |        |                | (13,371 | )     
|Provision for income taxes  continuing operations |                                                                                                                                                    |                          | (76     | )                        |        |                | (75     | )     
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Loss  continuing operations                       |                                                                                                                                                    |                          | (8,950  | )                        |        |                | (13,446 | )     
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Discontinued operations:                           |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   | Loss from discontinued operations before income taxes                                                                                              |                          |         | (134                     | )      |                |         | (984   | )     
|                                                   | Income tax provision                                                                                                                               |                          |         |                         |        |                |         |       |       
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|                                                   | Loss from discontinued operations after income taxes                                                                                               |                          |         | (134                     | )      |                |         | (984   | )     
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Net loss                                           |                                                                                                                                                    |                          | (9,084  | )                        |        |                | (14,430 | )     
|Preferred stock dividend                           |                                                                                                                                                    |                          | (3,776  | )                        |        |                |        |       
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Net loss attributable to common stock              |                                                                                                                                                    | $                        | (12,860 | )                        |        | $              | (14,430 | )     
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Basic and diluted loss per common share:           |                                                                                                                                                    |                          |         |                          |        |                |         |       
|Net loss attributable to common stock              |                                                                                                                                                    | $                        | (1.84   | )                        |        | $              | (0.51   | )     
|                                                   |                                                                                                                                                    |                          |         |                          |        |                |         |       

Upon emergence from Chapter 11, the Company adopted fresh start reporting. As a result, all assets and liabilities were
restated to reflect their fair values. The consolidated financial statements of the new reporting entity (the Successor)
are not comparable to the reporting entity prior to the Companys emergence from Chapter 11 (the Predecessor).

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 |     |  |   |       
|                                           |                                                       |  |              |   |            |   |                                             |   |         |   |               |   |        |   |         |        |   |   | OTHER       |     |  |   |       
|                                           |                                                       |  | COMMON STOCK |   | ADDITIONAL |   |                                             |   |         |   | COMPREHENSIVE |   | TOTAL 
|                                           |                                                       |  |              |   | PAID-IN    |   | ACCUMULATED                                 |   | LOSS    |   | STOCKHOLDERS'
|                                           |                                                       |  | SHARES       |   | AMOUNT     |   | CAPITAL                                     |   | DEFICIT |   | (net of tax)  |   | EQUITY
|                                           |                                                       |  |              |   |            |   |                                             |   |         |   |               |   |       
|                                           |                                                       |  |              |   |            |   | (Unaudited in thousands, except share data) |   |         |   |              
|Balance, December 31, 2002                 |                                                       |  | 7,000,000    |   |            |   | 70                                          |   |         |   | 89,223        |   |        |   | (10,836 | )      |   |   |            |     |  |   | 78,457 |       
|Comprehensive loss:                        |                                                       |  |              |   |            |   |                                             |   |         |   |               |   |        |   |         |        |   |   |             |     |  |   |        |       
|                                           | Net loss                                              |  |              |  |            |   |                                             |  |         |   |               |  |        |   |         | (9,084 | ) |   |             |    |  |   |        | (9,084 | )
|                                           | Currency translation
adjustments, net of tax of $ nil |  |              |  |            |   |                                             |  |         |   |               |  |        |   |         |       |   |   |             | 407 |  |   |        | 407    |  
|                                           |                                                       |  |              |   |            |   |                                             |   |         |   |               |   |        |   |         |        |   |   |             |     |  |   |        |       
|Total comprehensive loss                   |                                                       |  |             |   |            |   |                                            |   |         |   |              |   |        |   |        |        |   |   |            |     |  |   | (8,677 | )     
|Preferred dividends accrued (not declared) |                                                       |  |             |   |            |   |                                            |   |         |   |              |   |        |   | (3,776  | )      |   |   |            |     |  |   | (3,776 | )     
|                                           |                                                       |  |              |   |            |   |                                             |   |         |   |               |   |        |   |         |        |   |   |             |     |  |   |        |       
|                                           |                                                       |  | 7,000,000    |   |            | $ | 70                                          |   |         | $ | 89,223        |   |        | $ | (23,696 | )      |   | $ | 407         |     |  | $ | 66,004 |       
|                                           |                                                       |  |              |   |            |   |                                             |   |         |   |               |   |        |   |         |        |   |   |             |     |  |   |        |       

The comprehensive loss for the three months ended March 31, 2002 was $14.5 million.

See notes to condensed consolidated financial statements.

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##### Table of Contents



LODGIAN, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |         |        |        |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------------------ | -------------------------------------------------- | ------- | ------------------------ | ------ | -------------- | ------- | ------ | ------ | -
|                                                                        |                                                                                                        |                                                        |                                                    |         | Three months ended      
|                                                                        |                                                                                                        |                                                        |                                                    |         |                         
|                                                                        |                                                                                                        |                                                        |                                                    |         | March 31, 2003           |        | March 31, 2002
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |               
|                                                                        |                                                                                                        |                                                        |                                                    |         | (Unaudited in thousands)
|                                                                        |                                                                                                        |                                                        |                                                    |         | Successor                |        | Predecessor   
|Operating activities:                                                   |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        | Loss  continuing operations                                                                           |                                                        | $                                                  | (8,950  | )                        |        | $              | (13,446 | )     
|                                                                        | Adjustments to reconcile loss from continuing operations
to net cash provided by operating activities: |                                                        |                                                    |         |                          |        |                |         |       
|                                                                        |                                                                                                        | Depreciation and amortization                          |                                                    |         | 8,870                    |        |                |         | 13,491 |       
|                                                                        |                                                                                                        | Minority interests                                     |                                                    |         | 148                      |        |                |         | 473    |       
|                                                                        |                                                                                                        | Write-off and amortization of deferred financing costs |                                                    |         | 652                      |        |                |         |       |       
|                                                                        |                                                                                                        | Other                                                  |                                                    |         | 342                      |        |                |         | 98     |       
|                                                                        |                                                                                                        | Net changes in operating assets and liabilities:       |                                                    |         |                          |        |                |         |        |       
|                                                                        |                                                                                                        |                                                        | Accounts receivable, net of allowances             |         |                          | (2,385 | )              |         |        | (3,054 | )
|                                                                        |                                                                                                        |                                                        | Inventories                                        |         |                          | 41     |                |         |        | (6     | )
|                                                                        |                                                                                                        |                                                        | Prepaid expenses, other assets and restricted cash |         |                          | 10,603 |                |         |        | (3,379 | )
|                                                                        |                                                                                                        |                                                        | Accounts payable                                   |         |                          | 185    |                |         |        | 7,698  |  
|                                                                        |                                                                                                        |                                                        | Other accrued liabilities                          |         |                          | (3,881 | )              |         |        | 6,152  |  
|                                                                        |                                                                                                        |                                                        | Advance deposits                                   |         |                          | 1,276  |                |         |        | 918    |  
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Net cash provided by operating activities                               |                                                                                                        |                                                        | 6,901                                              |         |                          |        | 8,945          |        
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Investing activities:                                                   |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        | Capital improvements                                                                                   |                                                        |                                                    | (10,309 | )                        |        |                | (2,694  | )     
|                                                                        | Withdrawals (deposits) for capital expenditures                                                        |                                                        |                                                    | 5,767   |                          |        |                | (1,243  | )     
|                                                                        | Other                                                                                                  |                                                        |                                                    | (357    | )                        |        |                |        |       
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Net cash used in investing activities                                   |                                                                                                        |                                                        | (4,899                                             | )       |                          |        | (3,937         | )      
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Financing activities:                                                   |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        | Principal payments on long-term obligations                                                            |                                                        |                                                    | (2,396  | )                        |        |                | (678    | )     
|                                                                        | Payments of deferred loan costs                                                                        |                                                        |                                                    | (352    | )                        |        |                |        |       
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Net cash used in financing activities                                   |                                                                                                        |                                                        | (2,748                                             | )       |                          |        | (678           | )      
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Cash flows from discontinued operations:                                |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Net cash provided by discontinued operations                            |                                                                                                        |                                                        | (177                                               | )       |                          |        |               |        
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Net (decrease) increase in cash and cash equivalents                    |                                                                                                        |                                                        | (923                                               | )       |                          |        | 4,330          |        
|Cash and cash equivalents at beginning of period                        |                                                                                                        |                                                        | 10,875                                             |         |                          |        | 14,007         |        
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        |                                                                                                        |                                                        | 9,952                                              |         |                          |        | 18,337         |        
|Less: cash of discontinued operations                                   |                                                                                                        |                                                        |                                                   |         |                          |        | (173           | )      
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Cash and cash equivalents at end of period                              |                                                                                                        | $                                                      | 9,952                                              |         |                          | $      | 18,164         |        
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Supplemental cash flow information:                                     |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Cash paid during the period for:                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        | Interest, net of amount capitalized                                                                    |                                                        | $                                                  | 6,432   |                          |        | $              | 6,162   |       
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        | Income taxes, net of refunds                                                                           |                                                        | $                                                  |        |                          |        | $              |        |       
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Supplemental disclosure of non-cash investing and
financing activities: |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        | Preferred stock dividend accrued                                                                       |                                                        | $                                                  | 3,776   |                          |        | $              |        |       
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|                                                                        | Net non-cash debt decrease                                                                             |                                                        | $                                                  | 15,922  |                          |        | $              |        |       
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        
|Operating cash payments resulting from
Chapter 11 proceedings           |                                                                                                        | $                                                      | 1,050                                              |         |                          | $      | 2,853          |        
|                                                                        |                                                                                                        |                                                        |                                                    |         |                          |        |                |        

Upon emergence from Chapter 11, the Company adopted fresh start reporting. As a result, all assets and liabilities were
restated to reflect their fair values. The consolidated financial statements of the new reporting entity (the Successor)
are not comparable to the reporting entity prior to the Companys emergence from Chapter 11 (the Predecessor).

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)


1. General

The condensed consolidated financial statements include the accounts of
Lodgian, Inc., its wholly-owned subsidiaries and four joint ventures in which
Lodgian owns at least a 50% interest and exercises control (collectively
Lodgian or the Company). Lodgian believes it has control of the joint
ventures when the Company manages and has control of the joint ventures assets
and operations. One unconsolidated entity (the Unconsolidated Entity) which
owns one hotel is accounted for using the equity method of accounting. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

The accounting policies followed for quarterly financial reporting are the
same as those disclosed in Note 1 of the Notes to Consolidated Financial
Statements included in the Companys Annual Report on Form 10-K (Form 10-K)
for the year ended December 31, 2002.

As previously indicated in the Companys Form 10-K for the year ended
December 31, 2002, the Company and substantially all of its subsidiaries which
owned hotel properties filed for voluntary reorganization under Chapter 11 of
the Bankruptcy Code on December 20, 2001 in the Southern District of New York.
The Bankruptcy Court confirmed the Companys First Amended Joint Plan of
Reorganization (the Joint Plan of Reorganization) on November 5, 2002, and on
November 25, 2002, the Company and entities owning 78 hotels officially emerged
from Chapter 11. Pursuant to the terms of the Joint Plan of Reorganization,
eight other wholly-owned hotels were returned to the lender in early January
2003 in satisfaction of outstanding debt obligations and one hotel (also
wholly-owned) was returned to the lessor of a capital lease.

Of the Companys 97 hotel portfolio, 18 hotels (the Impac Hotels) are
owned by two subsidiaries (the Impac Debtors) which were not part of the
Joint Plan of Reorganization and remain in Chapter 11. The Impac Hotels
represent approximately 19% of the Companys total hotel properties and 14% of
the Companys total hotel rooms as of May 12, 2003. The Impac Hotels
contributed approximately 12% and 13% of the Successor revenues for the three
months ended March 31, 2003 and the Predecessor revenues for the three months
ended March 31, 2002, respectively. All of the Impac Hotels received financing
prior to the bankruptcy filing from one lender which has a secured claim of
$109.0 million against the Impac Debtors secured by the Impac Hotels. The
Company and the Impac Debtors reached an agreement on October 21, 2002
(approved by the Bankruptcy Court on October 31, 2002) with such lender which
provides for a release of the hotel collateral in exchange for the payment by
the Impac Debtors of an agreed amount (the Impac Settlement Amount) by a date
no later than May 31, 2003. If the agreed amount is not paid by May 31, 2003,
the Impac Hotels will, consensually, be returned to the lender or disposed of
at the secured lenders direction. On April 24, 2003, the plan of
reorganization for the Impac Debtors (the Impac Plan of Reorganization) was
confirmed by the Bankruptcy Court pursuant to the terms of which the Company
and the Impac Debtors, through 18 newly-formed subsidiaries, will obtain
financing from Lehman Brothers Holdings Inc. (the Lehman Financing), which is
to be used to pay the Impac Settlement Amount. Although there can be no
assurance, the Company is hopeful that the Lehman Financing will be
successfully completed on or before May 31, 2003 and, accordingly, that the
Company will be able to retain the Impac Hotels.

The effects of the Joint Plan of Reorganization were recorded in
accordance with the American Institute of Certified Public Accountants
Statement of Position (SOP) 90-7, Financial Reporting by Entities in
Reorganization under the Bankruptcy Code, effective November 22, 2002. SOP
90-7 required the application of Fresh Start Accounting. As a result, the
Consolidated Financial Statements subsequent to the Companys emergence from
Chapter 11 are those of a new reporting entity (the Successor) and are not
comparable with the financial statements of the Company prior to the effective
date of the Joint Plan of Reorganization (the Predecessor).

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting primarily
of normal recurring adjustments, necessary to present fairly the financial
position of the Company as of March 31, 2003, the results of its operations for
the three months ended March 31, 2003 (Successor) and 2002 (Predecessor) and
its cash flows for the three months ended March 31, 2003 (Successor) and 2002
(Predecessor). The results for interim periods are not

5



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necessarily indicative of the results for the entire year. These financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Companys Form 10-K for the year
ended December 31, 2002.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America (GAAP) requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.

2. Discontinued operations

Pursuant to the terms of the Joint Plan of Reorganization, eight
wholly-owned hotels were returned to the lender in early January 2003 in
satisfaction of outstanding debt obligations and one hotel (also wholly-owned)
was returned to the lessor of a capital lease.

In accordance with Statement of Financial Standards (SFAS) No. 144, the
results of operations of these hotels are reported separately as Discontinued
Operations for the three months ended March 31, 2003 and 2002. There was no
gain or loss on this transaction.

The following condensed table summarizes the assets and liabilities of
these hotels at December 31, 2002:

|                                      |                      |                                           |                           |                      |     |                   |       | 
|------------------------------------- | -------------------- | ----------------------------------------- | ------------------------- | -------------------- | --- | ----------------- | ----- | 
|                                      |                      |                                           |                           |                      |     | December 31, 2002
|                                      |                      |                                           |                           |                      |     |                  
|                                      |                      |                                           |                           |                      |     | (In thousands)   
|ASSETS                                |                      |                                           |                           |                     
|Current assets:                       |                      |                                           |                           |                     
|                                      |                      | Cash and cash equivalents                 |                           | $                    | 177 |                  
|                                      |                      | Accounts receivable, net                  |                           |                      | 517 |                  
|                                      |                      | Inventories                               |                           |                      | 570 |                  
|                                      |                      | Prepaid expenses and other current assets |                           |                      | 432 |                  
|                                      |                      |                                           |                           |                     
|                                      |                      |                                           |                           | Total current assets |     |                   | 1,696 | 
|Property and equipment, net           |                      |                                           | 15,649                    |                     
|Deposits for capital expenditures     |                      |                                           | 904                       |                     
|Other assets                          |                      |                                           | 20                        |                     
|                                      |                      |                                           |                           |                     
|                                      |                      | $                                         | 18,269                    |                     
|                                      |                      |                                           |                           |                     
|LIABILITIES                           |                      |                                           |                           |                     
|Liabilities not subject to compromise |                      |                                           |                           |                     
|                                      | Current liabilities: |                                           |                           |                      |    
|                                      |                      |                                           | Accounts payable          |                      | $   | 330               |      
|                                      |                      |                                           | Other accrued liabilities |                      |     | 1,267             |      
|                                      |                      |                                           | Advance deposits          |                      |     | 60                |      
|                                      |                      |                                           |                           |                     
|                                      |                      |                                           | Total current liabilities |                      |     | 1,657             |      
|Long-term debt subject to compromise  |                      |                                           | 15,922                    |                     
|                                      |                      |                                           |                           |                     
|                                      |                      |                                           | Total liabilities         |                      | $   | 17,579            |      
|                                      |                      |                                           |                           |                     

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The results of operations of these hotels at March 31, 2003 and 2002 were
as follows:

|                                  |  |                   |                          |   |                          |     |                |   |       |       | 
|--------------------------------- |  | ----------------- | ------------------------ | - | ------------------------ | --- | -------------- | - | ----- | ----- | 
|                                  |  |                   |                          |   | Three months ended      
|                                  |  |                   |                          |   |                         
|                                  |  |                   |                          |   | March 31, 2003           |     | March 31, 2002
|                                  |  |                   |                          |   |                          |     |               
|                                  |  |                   |                          |   | (Unaudited in thousands)
|                                  |  |                   |                          |   | Successor                |     | Predecessor   
|Revenues:                         |  |                   |                          |   |                          |     |                |  
|                                  |  | Rooms             |                          | $ | 153                      |     |                | $ | 3,642 |      
|                                  |  | Food and beverage |                          |   | 16                       |     |                |   | 1,095 |      
|                                  |  | Other             |                          |   |                         |     |                |   | 184   |      
|                                  |  |                   |                          |   |                          |     |                |  
|                                  |  |                   | 169                      |   |                          |     | 4,921          |  
|                                  |  |                   |                          |   |                          |     |                |  
|Operating expenses:               |  |                   |                          |   |                          |     |                |  
|                                  |  | Direct:           |                          |   |                          |     |                |   |       |      
|                                  |  |                   | Rooms                    |   |                          | 19  |                |   |       | 1,304 | 
|                                  |  |                   | Food and beverage        |   |                          | 28  |                |   |       | 881   | 
|                                  |  |                   | Other                    |   |                          | 13  |                |   |       | 157   | 
|                                  |  |                   |                          |   |                          |     |                |  
|                                  |  |                   | 60                       |   |                          |     | 2,342          |  
|                                  |  |                   |                          |   |                          |     |                |  
|                                  |  |                   | Gross contribution       |   |                          | 109 |                |   |       | 2,579 | 
|General, administrative and other |  |                   | 243                      |   |                          |     | 2,759          |  
|Depreciation and amortization     |  |                   |                         |   |                          |     | 804            |  
|                                  |  |                   |                          |   |                          |     |                |  
|                                  |  |                   | Other operating expenses |   |                          | 243 |                |   |       | 3,563 | 
|                                  |  |                   |                          |   |                          |     |                |  
|Loss before income taxes          |  |                   | (134                     | ) |                          |     | (984           | )
|Provision for income taxes        |  |                   |                         |   |                          |     |               |  
|                                  |  |                   |                          |   |                          |     |                |  
|Net loss                          |  | $                 | (134                     | ) |                          | $   | (984           | )
|                                  |  |                   |                          |   |                          |     |                |  

3. Liabilities subject to compromise

Liabilities subject to compromise refers to known liabilities incurred
prior to the commencement of the Chapter 11 cases, including those considered
by the Bankruptcy Court to be pre-petition claims. These liabilities consist
primarily of amounts outstanding under long-term debt and also include accounts
payable. These amounts represent the Companys estimate of known or potential
claims to be resolved in the Chapter 11 cases. Such claims remain subject to
future adjustments. Adjustments may result from (1) negotiations; (2) actions
of the Bankruptcy Court; (3) further development with respect to disputed
claims; (4) proofs of claim; or (5) other events.

The principal categories of claims classified as liabilities subject to
compromise in the Chapter 11 Cases as of March 31, 2003 and December 31, 2002,
are identified below (amounts in thousands):

|                 |  |                |        |                   |  |   |        | 
|---------------- |  | -------------- | ------ | ----------------- |  | - | ------ | 
|                 |  | March 31, 2003 |        | December 31, 2002
|                 |  |                |        |                  
|Long-term debt   |  | $              | 74,599 |                   |  | $ | 91,421 | 
|Accounts payable |  |                | 2,395  |                   |  |   | 2,395  | 
|                 |  |                |        |                   |  |   |        | 
|                 |  | $              | 76,994 |                   |  | $ | 93,816 | 
|                 |  |                |        |                   |  |   |        | 

4.     Cash, restricted

Restricted cash as of March 31, 2003 consists of amounts reserved for
letter of credit collateral, debt service, taxes, insurance and other
lender-restricted cash balances.

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5. Property and equipment, net

As previously disclosed, pursuant to the terms of the Joint Plan of
Reorganization, eight wholly-owned hotels were returned to the lender in early
January 2003 in satisfaction of outstanding debt obligations and one hotel
(also wholly-owned) was returned to the lessor of a capital lease. As a
result, property and equipment with a carrying value of $15.6 million were
surrendered. The results of operations for the surrendered hotels are
presented in these Condensed Consolidated Statement of Operations as
Discontinued Operations.

6. Earnings per share

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

|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |         |        | 
|---------------------------------------- | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | - | ------------------------------- | ----- | -------------- | - | ------- | ------ | 
|                                         |                                                                                             |                                                                            |   | Three months ended             
|                                         |                                                                                             |                                                                            |   |                                
|                                         |                                                                                             |                                                                            |   | March 31, 2003                  |       | March 31, 2002
|                                         |                                                                                             |                                                                            |   |                                 |       |               
|                                         |                                                                                             |                                                                            |   | (Unaudited in thousands, except
|                                         |                                                                                             |                                                                            |   | per share data)                
|                                         |                                                                                             |                                                                            |   | Successor                       |       | Predecessor   
|Numerator:                               |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Loss  continuing operations                                                                |                                                                            | $ | (8,950                          | )     |                | $ | (13,446 | )     
|                                         | Loss from discontinued operations                                                           |                                                                            |   | (134                            | )     |                |   | (984    | )     
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Net loss                                                                                    |                                                                            |   | (9,084                          | )     |                |   | (14,430 | )     
|                                         | Preferred stock dividend                                                                    |                                                                            |   | (3,776                          | )     |                |   |        |       
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Net loss attributable to common stock                                                       |                                                                            |   | (12,860                         | )     |                |   | (14,430 | )     
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Loss  continuing operations                                                                |                                                                            |   | (8,950                          | )     |                |   | (13,446 | )     
|                                         | Preferred stock dividend                                                                    |                                                                            |   | (3,776                          | )     |                |   |        |       
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Loss from continuing operations attributable to common stock
before discontinued operations |                                                                            | $ | (12,726                         | )     |                | $ | (13,446 | )     
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|Denominator:                             |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         |                                                                                             | Denominator for basic and diluted loss
per share  weighted-average shares |   |                                 | 7,000 |                |   |         | 28,480 | 
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|Basic and diluted loss per common share: |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Loss from continuing operations attributable to common stock
before discontinued operations |                                                                            |   | (1.82                           | )     |                |   | (0.47   | )     
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Loss  continuing operations                                                                |                                                                            |   | (1.28                           | )     |                |   | (0.47   | )     
|                                         | Loss from discontinued operations                                                           |                                                                            |   | (0.02                           | )     |                |   | (0.04   | )     
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Net loss                                                                                    |                                                                            |   | (1.30                           | )     |                |   | (0.51   | )     
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        
|                                         | Net loss attributable to common stock                                                       |                                                                            | $ | (1.84                           | )     |                | $ | (0.51   | )     
|                                         |                                                                                             |                                                                            |   |                                 |       |                |   |        

The computation of diluted earnings per share for the Successor period
ended March 31, 2003, as calculated above, did not include shares associated
with the assumed conversion of the A and B warrants because their inclusion
would have been antidilutive. The computation of diluted earnings per share for
the Predecessor period ended March 31, 2002, as calculated above, did not
include shares associated with the assumed conversion of the CRESTS (8,169,935
shares) or stock options because their inclusion would have been antidilutive.

7. Other accrued liabilities

At March 31, 2003 and December 31, 2002, other accrued liabilities
consisted of the following:

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|                                 |  |                |        |                   |  |   |        | 
|-------------------------------- |  | -------------- | ------ | ----------------- |  | - | ------ | 
|                                 |  | March 31, 2003 |        | December 31, 2002
|                                 |  |                |        |                  
|                                 |  | (In thousands)
|Salaries and related costs       |  | $              | 15,822 |                   |  | $ | 17,293 | 
|Property and sales taxes         |  |                | 14,199 |                   |  |   | 16,668 | 
|Provision for state income taxes |  |                | 2,433  |                   |  |   | 2,219  | 
|Franchise fee accrual            |  |                | 1,886  |                   |  |   | 1,388  | 
|Accrued interest                 |  |                | 1,376  |                   |  |   | 1,524  | 
|Professional fees                |  |                | 538    |                   |  |   | 807    | 
|Accrual for allowed claims       |  |                | 700    |                   |  |   | 1,749  | 
|Other                            |  |                | 2,023  |                   |  |   | 2,477  | 
|                                 |  |                |        |                   |  |   |        | 
|                                 |  | $              | 38,977 |                   |  | $ | 44,125 | 
|                                 |  |                |        |                   |  |   |        | 

8. Long-term debt

On November 25, 2002, the effective date of the Joint Plan of
Reorganization, loans approximating $83.5 million, secured by 20 hotel
properties, were substantially reinstated on their original terms, except for
the extension of certain maturities. The terms of one loan, in the amount of
$2.5 million and secured by one hotel, were amended to provide for a new
interest rate as well as a new maturity date.

In addition, the Company received exit financing of $309 million with and
through Merrill Lynch Mortgage Lending, Inc. (Merrill), secured by 57 hotel
properties. The exit financing was initially comprised of three separate
components as follows:



| |  |  | Senior debt of $224.0 million accruing interest at
the rate of LIBOR plus 2.2442%, secured by, among other things,
first mortgage liens on the fee simple and leasehold interests
in 55 of the Companys hotels;                                                                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Mezzanine debt of $78.7 million accruing interest at
the rate of LIBOR plus 9.00% secured by the equity interest in
the subsidiaries of 56 hotels (the 55 which secure the Senior
Debt and one additional hotel); and                                                                                          
|
| |  |  | Canadian debt provided through Computershare Trust
Company of Canada, a Canadian lender, of $10.0 million Canadian
dollars (equated to approximately $6.3 million U.S. dollars at
inception) maturing in December 2007 accruing interest at the
rate of 7.879% (secured by a mortgage on the Windsor property).

In March 2003, as permitted by the terms of the Senior and Mezzanine debt
agreements, Merrill exercised the right to resize the Senior and Mezzanine
debt amounts, prior to the securitization of the mortgage loan. As a result,
the principal amount of the Mortgage Loan was decreased from $223.5 million
(initially $224.0 less $0.5 million of principal payments) to $218.1 million,
and the initial principal amount of the Mezzanine Loan was increased from $78.7
million to $84.1 million. In connection with the resizing, the interest rates
on the Senior and Mezzanine debts were also modified to LIBOR plus 2.36% and
LIBOR plus 8.2546%, respectively.

The Senior and Mezzanine debts mature in November 2004. There are,
however, three one-year options to renew which could extend the facility for an
additional three years. The first option to extend the maturity date of the
Senior and Mezzanine debts by one year (i.e. to November 2005) is available
only if no events of default occur in respect of the payments of principal,
interest and other required payments. The second and third extension terms are
available only if no events of default (as defined by the agreement) exist and
are subject to minimum Debt Service Coverage Ratio and Debt Yield requirements.
Payments of principal and interest on all three portions of the facility are
due monthly; however, the principal payments on the Senior and Mezzanine debts
may be deferred during the first twelve months of the agreement.

The Senior and Mezzanine debt agreements provide that when either the Debt
Yield (as defined) for the trailing 12-month period is below 12.75% during the
first year of the loan ending November 2003

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(13.25% during the second year) or the Debt Service Coverage Ratio (as
defined) is below 1.20, excess cash flows (after payment of operating expenses,
management fees, required reserves, principal and interest) produced by the 56
properties must be deposited in a special deposit account. These funds cannot
be transferred to the parent company, but can be used for capital expenditures
on these properties with lenders approval, or for principal and interest
payments. Funds placed into the special deposit account are released to the
borrowers when the Debt Yield and the Debt Service Coverage Ratio are sustained
above the minimum requirements for three consecutive months. As of March 31,
2003, the Debt Yield for the 56 properties was below the 12.75% threshold and,
therefore, any excess cash produced by the 56 properties will be retained in
the special deposit account until the Debt Yield increases above the minimum.

The Company through its wholly owned subsidiaries owes approximately $11.4
million under Industrial Revenue Bonds (IRBs) issued on the Holiday Inn
Lawrence, Kansas and Holiday Inn Manhattan, Kansas properties. The IRBs
require a minimum debt service coverage ratio (DSCR) (as defined). For the
year ended December 31, 2002, the cash flows of the two properties were
insufficient to meet the minimum DSCR requirements due in part to renovations
that were being performed at the properties during 2002. The trustee of the
IRBs may give notice of default, at which time the Company could remedy the
default by depositing with the trustee an amount currently estimated at less
than $1 million. In the event a default is declared and not cured, the
properties could be subject to foreclosure and the Company would be obligated
pursuant to a partial guaranty in an amount not to exceed $1.4 million.

Substantially all of the Companys property and equipment are pledged as
collateral for long-term obligations. Certain of the mortgage notes are subject
to a prepayment penalty if repaid prior to their maturity.

The Company is subject to certain property maintenance and quality
standard compliance requirements under its franchise agreements. The Company
periodically receives notifications from its franchisors of events of
non-compliance with such agreements. In the past, management has cured most
cases of non-compliance within the applicable cure periods and the events of
non-compliance did not result in events of default under the respective loan
agreements. However, in selected situations and based on economic evaluations,
management may elect to not comply with the franchisor requirements. In such
situations, the Company will either select an alternative franchisor or operate
the property independent of any franchisor (See Note 10).

9. Income taxes

The Company recorded an income tax provision of $0.1 million for the three
months ended March 31, 2003. The provision for the Predecessor period ended
March 31, 2002 was also $0.1 million. Both related primarily to provisions for
state income taxes.

10. Commitments and Contingencies

As of May 14, 2003, the Company had received termination notices from
franchisors with respect to seven properties (this does not include two hotels
for which the Company has met all of the requirements to cure but has not yet
received the cure letter from the franchisor). Also, the Company was not in
strict compliance with the terms of eleven other franchise agreements (this
does not include four other hotels for which the Company has met all of the
requirements to cure but has not yet received the cure letter from the
franchisor). The Company has a capital improvement program to address the
capital improvements required by the franchisors, the re-branding of several
hotels and general renovation projects intended to ultimately improve the
operations of the hotels. As of March 31, 2003, the anticipated expenditures
for such projects during the two years ending December 2004 are approximately
$61.6 million, with approximately $15.1 million escrowed for such improvements.

While it is the Companys belief that it will cure any defaults under the
franchise agreements before the applicable termination dates, there can be no
assurance that it will be able to do so or be able to obtain additional time in
which to cure any defaults. In the event of a franchise termination, management
may seek to license the hotel with another nationally-recognized brand.

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The license agreements are subject to cancellation in the event of a
default, including the failure to operate the hotel in accordance with the
quality standards and specification of the licensors. The Company believes that
the loss of a license for any individual hotel would not have a material
adverse effect on the Companys financial condition and results of operations.
The Company believes it will be able to renew its current licenses or obtain
replacements of a comparable quality.

As part of the Impac Plan of Reorganization, the Company has elected to
reject its license agreement relating to its hotel in Cincinnati, Ohio and to
cease operating this hotel as a Holiday Inn upon the effective date of the
Impac Plan of Reorganization.

The Company is contingently liable with respect to three irrevocable
letters of credit totaling $4.9 million issued as guarantees to Zurich American
Insurance Company, Donlen Fleet Management Services and U.S. Food Services. The
letters of credit expire in November 2003 but may require renewal beyond those
dates.

The Company is self insured up to certain limits (deductibles) with
respect to employee medical, employee dental, property insurance, general
liability insurance, personal injury claims, workers compensation and auto
liability. Should unanticipated events cause these claims to escalate beyond
normal expectations, the Companys financial condition and results of
operations could be adversely affected.

The Company was a party in litigation with Hospitality Restoration and
Builders, Inc. (HRB), a general contractor hired to perform work on six of
the Companys hotels. The litigation involved hotels in Texas (filed in the
District Court of Harris County in October 1999), Illinois (in the United
States District Court, Northern District of Illinois, Eastern Division in
February 2000) and New York (filed in the Supreme Court, New York County in
July 1999). In general, HRB claimed that the Company breached contracts to
renovate the hotels by not paying for work performed. The Company contended
that it was over-billed by HRB and that a significant portion of the completed
work was defective. In July 2001, the parties agreed to settle the litigation
pending in Texas and Illinois. In exchange for mutual dismissals and full
releases, the Company paid HRB $750,000. With respect to the matter pending in
the state of New York, HRB claimed that it was owed $10.7 million. The Company
asserted a counterclaim of $7 million. In February 2003, the Company and HRB
agreed to settle the litigation pending in the state of New York. In exchange
for mutual dismissals and full releases, the Company agreed to pay HRB
$625,000. The Company provided fully for this liability in its Consolidated
Financial Statements for the year ended December 31, 2002.

The Company is party to other legal proceedings arising in the ordinary
course of business, the impact of which would not, either individually or in
the aggregate, in managements opinion, have a material adverse effect on its
financial position or results of operations. Certain of these claims are
limited to the amounts available under the Companys disputed claims reserve.

11. New Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN
45) which elaborates on the disclosures to be made by a guarantor in its
financial statements. It also requires a guarantor to recognize a liability
for the fair value of the obligation undertaken in issuing the guarantee at the
inception of a guarantee. The disclosure requirements of FIN 45 were effective
for the Company as of December 31, 2002. The recognition provisions of FIN 45
will be applied on a prospective basis to guarantees issued after December 31,
2002. The Company does not expect the requirements of FIN 45 to have a
material impact on its financial position and results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46). FIN 46 addresses consolidation by a
business of variable interest entities in which it is the primary beneficiary.
FIN 46 is effective immediately for certain disclosure requirements and
variable interest entities created after January 31, 2003, and effective for
periods beginning after June 15, 2003 for existing variable interest entities.
At March 31, 2003, the Company had no variable interest entities and

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therefore anticipates that the effects of adopting FIN 46 will not be material
to its financial position and results of operations.

12. Related party transactions

Richard Cartoon, the Companys Executive Vice President and Chief
Financial Officer, is a principal in a business that the Company 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, the Company was billed $52,000, including expenses,
for other support and services provided by associates of Richard Cartoon, LLC
for the three months ended March 31, 2003.

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

Chapter 11 proceedings

As previously discussed in the Notes to the Condensed Consolidated
Financial Statements included in this Form 10-Q, the Company and substantially
all of its subsidiaries which owned hotel properties filed for voluntary
reorganization under Chapter 11 of the Bankruptcy Code on December 20, 2001.
The Bankruptcy Court confirmed the Companys First Amended Joint Plan of
Reorganization (the Joint Plan of Reorganization) on November 5, 2002 and on
November 25, 2002, the Company and entities owning 78 hotels officially emerged
from Chapter 11. Pursuant to the terms of the Joint Plan of Reorganization,
eight other wholly-owned hotels were returned to the lender in early January
2003 in satisfaction of outstanding debt obligations and one hotel (also
wholly-owned) was returned to the lessor of a capital lease.

Of the Companys 97 hotel portfolio, 18 hotels (the Impac Hotels) are
owned by two subsidiaries (the Impac Debtors) which were not part of the
Joint Plan of Reorganization and remain in Chapter 11. The Impac Hotels
represent approximately 19% of the Companys total hotel properties and 14% of
the Companys total hotel rooms as of May 12, 2003. The Impac Hotels
contributed approximately 12% and 13% of the Successor revenues for the three
months ended March 31, 2003 and the Predecessor revenues for the three months
ended March 31, 2002, respectively. All of the Impac Hotels received financing
prior to the bankruptcy filing from one lender which has a secured claim of
$109.0 million against the Impac Debtors secured by the Impac Hotels. The
Company and the Impac Debtors reached an agreement on October 21, 2002
(approved by the Bankruptcy Court on October 31, 2002) with such lender which
provides for a release of the hotel collateral in exchange for the payment by
the Impac Debtors of an agreed amount (the Impac Settlement Amount) by a date
no later than May 31, 2003. If the agreed amount is not paid by May 31, 2003,
the Impac Hotels will, consensually, be returned to the lender or disposed of
at the secured lenders direction. On April 24, 2003, the plan of
reorganization for the Impac Debtors (the Impac Plan of Reorganization) was
confirmed by the Bankruptcy Court pursuant to the terms of which the Company
and the Impac Debtors, through 18 newly-formed subsidiaries, will obtain
financing from Lehman Brothers Holdings Inc. (the Lehman Financing), which is
to be used to pay the Impac Settlement Amount. Although there can be no
assurance, the Company is hopeful that the Lehman Financing will be
successfully completed on or before May 31, 2003, and, accordingly, that the
Company will be able to retain the Impac Hotels.

The effects of the Joint Plan of Reorganization were recorded in
accordance with the American Institute of Certified Public Accountants
Statement of Position (SOP) 90-7, Financial Reporting by Entities in
Reorganization under the Bankruptcy Code, effective November 22, 2002. SOP
90-7 required the application of Fresh Start Accounting. As a result, the
Consolidated Financial Statements subsequent to the Companys emergence from
Chapter 11 are those of a new reporting entity (the Successor) and are not
comparable with the financial statements of the Company prior to the effective
date of the Joint Plan of Reorganization (the Predecessor).

Forward-looking statements/risk factors

The following discussion should be read in conjunction with the Companys
Condensed Consolidated Financial Statements and related notes thereto included
elsewhere herein.

The discussion below and elsewhere in this Form 10-Q includes statements
that are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act. These include
managements expectations with respect to the Chapter 11 filing, statements
that describe anticipated revenues, capital expenditures and other financial
items, statements that describe the Companys business plans and objectives,
and statements that describe the expected impact of competition, government
regulation, litigation and other factors on the Companys future financial
condition and results of operations. The words may, should, expect,
believe, anticipate, project, estimate, and similar expressions are
intended to identify forward-looking statements. Such risks and

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uncertainties, any one of which may cause actual results to differ
materially from those described in the forward-looking statements, include or
relate to, among other things:



| |  |  | Risks associated with the Companys ability to maintain its
existing franchise affiliations which could affect the Companys
revenue generating capabilities;  
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The impact of potential litigation and/or governmental inquiries
and investigation involving the Company;                                                      
|
| |  |  | The effect of competition and the economy on the Companys ability
to maintain margins on existing operations, including uncertainties
relating to competition;
|
| |  |  | The Companys ability to generate sufficient cash flows from
operations to meet its obligations;                                                               
|
| |  |  | The effectiveness of changes in management and the ability of the
Company to retain qualified individuals to serve in senior management
positions;             
|
| |  |  | The potential for additional impairment charges against earnings
related to long-lived assets;                                                                 
|
| |  |  | Risks associated with reductions in hotel values which are
dependent upon the successful operation of the hotels;                                              
|
| |  |  | Risks associated with increases in the cost of debt;                                                                                                           
|
| |  |  | Risks associated with the holders of the Companys common stock
exercising significant control over the Company and selling large
blocks of shares;            
|
| |  |  | Risks as a result of the short time that the public market for the
Companys new securities has existed;                                                       
|
| |  |  | Risks as a result of the Company not being able to meet the
continuing listing requirements of the American Stock Exchange;                                    
|
| |  |  | Risks associated with self-insured claims escalating beyond expectations;                                                                                      
|
| |  |  | Risks associated with the Companys ability to finalize the Lehman financing by May 31, 2003;                                                                  
|
| |  |  | Risks associated with the Companys short operating history since
the effectiveness of its Joint Plan of Reorganization; and                                   
|
| |  |  | Risks associated with environmental, state and federal regulations.                                                                                            

Many of these factors are not within the Companys control and readers are
cautioned not to put undue reliance on these forward looking statements.

General Overview

Management believes that results of operations in the hotel industry are
best explained by three key performance measures: occupancy, average daily rate
(ADR) and revenue per available room (RevPAR) levels. These measures are
influenced by a variety of factors including national, regional and local
economic conditions, the degree of competition with other hotels in the area
and changes in travel patterns. The demand for accommodations is also affected
by normally recurring seasonal patterns and most of the Companys hotels
experience lower occupancy levels in the fall and winter months (November
through February) which may result in lower revenues, lower net income and less
cash flow during these months. RevPAR is derived by dividing room revenues by
the number of available room nights for a given period or, alternatively, by
multiplying the occupancy by the ADR.

The following table shows room data, occupancy, average daily rate and RevPAR
by category of hotel for the quarter ended March 31, 2003 and 2002 (shown for
those hotels owned and managed as of March 31, 2003):
14Table of Contents

|                                   |                      |  |                |        |                |  |   |        |  
|---------------------------------- | -------------------- |  | -------------- | ------ | -------------- |  | - | ------ | -
|                                   |                      |  | Quarter ended  |        | Quarter ended 
|                                   |                      |  | March 31, 2003 |        | March 31, 2002
|                                   |                      |  |                |        |               
|Upper Upscale                      |                      |  |                |        |                |  |   |       
|                                   | Number of properties |  |                | 4      |                |  |   | 4      |  
|                                   | Number of rooms      |  |                | 825    |                |  |   | 825    |  
|                                   | Occupancy            |  |                | 61.5   | %              |  |   | 60.7   | %
|                                   | Average daily rate   |  | $              | 92.50  |                |  | $ | 94.57  |  
|                                   | RevPAR               |  | $              | 56.90  |                |  | $ | 57.38  |  
|Upscale                            |                      |  |                |        |                |  |   |       
|                                   | Number of properties |  |                | 18     |                |  |   | 18     |  
|                                   | Number of rooms      |  |                | 3,156  |                |  |   | 3,156  |  
|                                   | Occupancy            |  |                | 66.0   | %              |  |   | 66.1   | %
|                                   | Average daily rate   |  | $              | 86.41  |                |  | $ | 87.52  |  
|                                   | RevPAR               |  | $              | 57.06  |                |  | $ | 57.81  |  
|Midscale with Food and Beverage*   |                      |  |                |        |                |  |   |       
|                                   | Number of properties |  |                | 60     |                |  |   | 60     |  
|                                   | Number of rooms      |  |                | 11,895 |                |  |   | 11,895 |  
|                                   | Occupancy            |  |                | 50.9   | %              |  |   | 52.9   | %
|                                   | Average daily rate   |  | $              | 68.39  |                |  | $ | 68.36  |  
|                                   | RevPAR               |  | $              | 34.82  |                |  | $ | 36.17  |  
|Midscale without Food and Beverage |                      |  |                |        |                |  |   |       
|                                   | Number of properties |  |                | 8      |                |  |   | 10     |  
|                                   | Number of rooms      |  |                | 1,047  |                |  |   | 1,282  |  
|                                   | Occupancy            |  |                | 44.9   | %              |  |   | 57.4   | %
|                                   | Average daily rate   |  | $              | 58.45  |                |  | $ | 56.67  |  
|                                   | RevPAR               |  | $              | 26.25  |                |  | $ | 32.51  |  
|Independent Hotels                 |                      |  |                |        |                |  |   |       
|                                   | Number of properties |  |                | 7      |                |  |   | 5      |  
|                                   | Number of rooms      |  |                | 1,342  |                |  |   | 1,107  |  
|                                   | Occupancy            |  |                | 38.8   | %              |  |   | 41.6   | %
|                                   | Average daily rate   |  | $              | 73.40  |                |  | $ | 89.30  |  
|                                   | RevPAR               |  | $              | 28.45  |                |  | $ | 37.15  |  
|All Hotels                         |                      |  |                |        |                |  |   |       
|                                   | Number of properties |  |                | 97     |                |  |   | 97     |  
|                                   | Number of rooms      |  |                | 18,265 |                |  |   | 18,265 |  
|                                   | Occupancy            |  |                | 52.8   | %              |  |   | 55.2   | %
|                                   | Average daily rate   |  | $              | 73.34  |                |  | $ | 73.74  |  
|                                   | RevPAR               |  | $              | 38.70  |                |  | $ | 40.67  |  

In accordance with the Smith Travel Research Chain Scales, the segments include the following brands:



| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | Upper Upscale: Hilton and Marriott                                                                                                                  
|
| | Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and Residence Inn                                                                            
|
| | Midscale with Food and Beverage: Clarion, Doubletree Club, Four Points, Holiday Inn, Holiday Inn Select,
Holiday Inn SunSpree Resort and Quality Inn
|
| | Midscale without Food and Beverage: Fairfield Inn, Hampton Inn and Holiday Inn Express                                                              

*Includes one hotel in Cincinnati, Ohio which the Company has elected to
cease operating as a Holiday Inn upon the effective date of the Impac Plan of
Reorganization.

The following table shows room data, occupancy, average daily rate and
RevPAR by geographic region for the quarter ended March 31, 2003 and 2002
(shown for those hotels owned and managed as of March 31, 2003):

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|                 |                      |  |                |        |                |  |   |        |  
|---------------- | -------------------- |  | -------------- | ------ | -------------- |  | - | ------ | -
|                 |                      |  | Quarter ended  |        | Quarter ended 
|                 |                      |  | March 31, 2003 |        | March 31, 2002
|                 |                      |  |                |        |               
|Northeast Region |                      |  |                |        |                |  |   |       
|                 | Number of properties |  |                | 37     |                |  |   | 37     |  
|                 | Number of rooms      |  |                | 7,011  |                |  |   | 7,011  |  
|                 | Occupancy            |  |                | 51.1   | %              |  |   | 51.4   | %
|                 | Average daily rate   |  | $              | 75.94  |                |  | $ | 74.62  |  
|                 | RevPAR               |  | $              | 38.80  |                |  | $ | 38.34  |  
|Southeast Region |                      |  |                |        |                |  |   |       
|                 | Number of properties |  |                | 34     |                |  |   | 34     |  
|                 | Number of rooms      |  |                | 5,794  |                |  |   | 5,794  |  
|                 | Occupancy            |  |                | 53.7   | %              |  |   | 56.8   | %
|                 | Average daily rate   |  | $              | 67.31  |                |  | $ | 69.74  |  
|                 | RevPAR               |  | $              | 36.16  |                |  | $ | 39.62  |  
|Midwest Region   |                      |  |                |        |                |  |   |       
|                 | Number of properties |  |                | 19     |                |  |   | 19     |  
|                 | Number of rooms      |  |                | 4,141  |                |  |   | 4,141  |  
|                 | Occupancy            |  |                | 49.6   | %              |  |   | 53.5   | %
|                 | Average daily rate   |  | $              | 70.89  |                |  | $ | 70.70  |  
|                 | RevPAR               |  | $              | 35.14  |                |  | $ | 37.86  |  
|West Region      |                      |  |                |        |                |  |   |       
|                 | Number of properties |  |                | 7      |                |  |   | 7      |  
|                 | Number of rooms      |  |                | 1,319  |                |  |   | 1,319  |  
|                 | Occupancy            |  |                | 67.4   | %              |  |   | 73.0   | %
|                 | Average daily rate   |  | $              | 89.67  |                |  | $ | 91.08  |  
|                 | RevPAR               |  | $              | 60.45  |                |  | $ | 66.47  |  
|All Hotels       |                      |  |                |        |                |  |   |       
|                 | Number of properties |  |                | 97     |                |  |   | 97     |  
|                 | Number of rooms      |  |                | 18,265 |                |  |   | 18,265 |  
|                 | Occupancy            |  |                | 52.8   | %              |  |   | 55.2   | %
|                 | Average daily rate   |  | $              | 73.34  |                |  | $ | 73.74  |  
|                 | RevPAR               |  | $              | 38.70  |                |  | $ | 40.67  |  

The regions are defined as follows:



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

Revenues. Revenues are comprised of room, food and beverage and other
revenues. Room revenues are derived from guest room rentals, whereas food and
beverage revenues primarily include sales from hotel restaurants, room service,
hotel catering and meeting room rentals. Other revenues include charges for
guests long-distance telephone service, laundry and parking.

Operating Expenses. Operating expenses are comprised of direct, general
and administrative, other expenses and depreciation and amortization. Direct
expenses, including rooms, food and beverage and other operations, reflect
expenses directly related to hotel operations. These expenses are primarily
variable with available rooms and occupancy rates, but also have a small fixed
component, which can be leveraged with increases in revenues. General,
administrative and other expenses primarily represent property level expenses
related to general operations such as marketing, utilities, repairs and
maintenance and other property administrative costs. General, administrative
and other expenses also include corporate overheads (such as accounting
services, legal and professional fees, information technology and executive

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management) which are generally fixed. Also included in general,
administrative and other expenses for the three months ended March 31, 2003 are
expenses relating to the reorganization proceedings for the hotels that have
emerged from Chapter 11.

Results of Operations

The discussion of results of operations, income taxes, liquidity and
capital resources that follows is derived from the Companys unaudited
Condensed Consolidated Financial Statements set forth in Item I. Financial
Statements included in this Form 10-Q and should be read in conjunction with
such financial statements and notes thereto.

Three Months Ended March 31, 2003 (First Quarter 2003) Compared to the Three
Months Ended March 31, 2002 (First Quarter 2002)

Revenues

At March 31, 2003, the Company owned 96 hotels and had a minority interest
in one hotel. At March 31, 2002, the Company owned 105 hotels and had a
minority interest in one hotel. The reduction in hotels is a result of the
return of eight hotels to the lender and one hotel to the lessor of a capital
lease. The revenues and operating expenses for the nine disposed properties
are reported as Discontinued Operations in the Condensed Consolidated Statement
of Operations.

Revenues for the Company were $85.5 million for the First Quarter 2003, a
4.8% decrease from revenues of $89.8 million for the First Quarter 2002.
RevPAR for hotels owned at the end of the First Quarter 2003 declined 4.8% from
the First Quarter 2002 primarily due to a reduction in occupancy (occupancy
declined by 4.3%). Revenues and RevPAR for the First Quarter 2003 were
adversely impacted by business declines related to the conflict in Iraq and a
continuing soft U.S. economy.

Operating Expenses

Direct operating expenses for the Company were $34.9 million (40.8% of
direct revenues) for the First Quarter 2003 and $35.7 million (39.8% of direct
revenues) for the First Quarter 2002. The $0.8 million decrease is primarily
due to the reduction in revenues.

General, administrative and other expenses were $42.5 million (49.7% of
direct revenues) for the First Quarter 2003 and $39.4 million (43.9% of direct
revenues) for the First Quarter 2002. Of the $3.1 million increase, $2.2
million is due to post-emergence expenses related to the Chapter 11 filing for
the 78 hotels that emerged from Chapter 11 in November 2002 and the nine
properties that were disposed of in early January 2003. These expenses include
legal and professional fees related to the claims reconciliation process as
well as fees payable to the United States Trustee of the Department of Justice,
which are required as part of the reorganization process. These expenses were
reported as reorganization items for the First Quarter 2002. General,
administrative and other expenses were also higher for the First Quarter 2003
due to higher utility and insurance costs.

Depreciation and amortization expense was $8.9 million in the First
Quarter 2003 and $13.5 million in the First Quarter 2002. The $4.6 million
decrease is a result of the write-down of fixed assets recorded on the
implementation of fresh start reporting on November 22, 2002.

Other Income and Expenses

Interest expense and other was $6.9 million in the First Quarter 2003 and
$9.0 million in the First Quarter 2002. This decrease is primarily
attributable to a reduction in the cost of debt. Average LIBOR was 1.40% and
1.89% for the First Quarter 2003 and 2002, respectively. Also, the interest
spread on the Companys variable rate debt in the First Quarter 2003 was
approximately 2% less than it was for the First Quarter 2002. In addition, as
previously reported in the Companys Annual Report on Form 10-K (Form 10-K)
for the year ended December 31, 2002, where the estimated value of the
underlying collateral in respect of certain debt was considered to be less than
the debt obligation, the Company ceased accruing interest on those debts.
Contractual interest expense in respect of these debts that was not recorded

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approximated $0.9 million for the First Quarter of 2003 and approximated $7.9
million for the First Quarter of 2002.

Reorganization items were $1.2 million for the First Quarter of 2003
compared to $5.8 million for the First Quarter of 2002. For the First Quarter
of 2003, reorganization items included only those Chapter 11 legal and
professional costs directly attributable to the Impac Debtors, as well as
extension fees paid to the secured lender of the Impac Debtors pursuant to the
settlement agreement. For the First Quarter 2002, the Company recorded all
costs incurred as a result of the Chapter 11 filing (mainly legal and
professional fees) as reorganization items.

Discontinued Operations

Pursuant to the terms of the Joint Plan of Reorganization, on January 3,
2003, eight wholly-owned hotels were returned to the lender in satisfaction of
outstanding debt obligations, and on January 15, 2003, one hotel (also
wholly-owned) was returned to the lessor of a capital lease. The First Quarter
2003 loss from discontinued operations was $0.1 million, a decrease of $0.9
million from the First Quarter 2002 loss of $1.0 million. The reduced loss is
due to the disposition of the properties early in the First Quarter 2003.

Income Taxes

As of December 31, 2002, Lodgian had net operating loss carry-forwards of
approximately $206 million for federal income tax purposes, which expire in
2004 through 2021. Under the Joint Plan of Reorganization, substantial amounts
of net operating losses were utilized to offset income from debt cancellations.
The Companys ability to use the remaining net operating loss carry-forwards to
offset future income is subject to limitations which could increase over time.
Due to these limitations, a portion or all of these net operating loss
carry-forwards could expire unused. In addition, the Company recorded an
income tax provision of $0.1 million for the First Quarter 2003, which related
primarily to provisions for state income taxes.

Liquidity and Capital Resources

Lodgian utilizes its cash flows for operating expenses, capital
expenditures and debt service. Currently, the Companys principal sources of
liquidity consist of existing cash balances and cash flow from operations.

As more fully discussed above, the Bankruptcy Court confirmed the
Companys Joint Plan of Reorganization on November 5, 2002 and on November 25,
2002, the Company and entities owning 78 hotels officially emerged from Chapter
11.

Pursuant to the terms of the Joint Plan of Reorganization, eight other
wholly-owned hotels were returned to the lender in early January 2003 in
satisfaction of outstanding debt obligations and one hotel (also wholly-owned)
was returned to the lessor of a capital lease. As a result of the surrender of
these nine hotels, property and equipment with a carrying value of $15.6
million was surrendered and long-term debt approximating $15.9 million was
extinguished. The results of operations for these nine hotels have been
presented as Discontinued Operations in the Condensed Consolidated Statements
of Operations. For the First Quarter 2002, these nine hotels contributed
management fees of approximately $0.2 million (negligible for the First Quarter
2003) towards the Companys corporate overheads.

Eighteen hotels owned by two wholly-owned subsidiaries of the Company were
not part of the Joint Plan of Reorganization. However, on April 24, 2003, the
plan of reorganization for these two subsidiaries was confirmed by the
Bankruptcy Court pursuant to the terms of which the Company and the Impac
Debtors, through 18 newly-formed subsidiaries, will obtain financing from
Lehman Brothers Holdings Inc.. The Impac Plan will become effective on the
finalization of the Lehman Financing, which will be utilized primarily to repay
the claim of the secured lender of these subsidiaries. If the Lehman Financing
is not finalized by May 31, 2003, the eighteen hotels will, consensually, be
returned to the secured lender or disposed of at the secured lenders
direction.

The Impac Hotels represent approximately 19% of the Companys total hotel
properties and 14% of the Companys total hotel rooms as of May 12, 2003. The
Impac Hotels contributed approximately 12% and 13% of the Successor revenues
for the three months ended March 31, 2003 and the Predecessor

18



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revenues for the three months ended March 31, 2002, respectively. In
addition, these eighteen hotels contributed management fees of approximately
$0.3 million towards corporate overheads for the First Quarter 2003
(approximately the same amount for the First Quarter 2002). Although there can be
no assurance, the Company is hopeful that the Lehman Financing will be
successfully completed and, accordingly, that the Company will be able to
retain the Impac Hotels.

As more fully discussed in Note 8 in the Notes to the Condensed
Consolidated Financial Statements, on November 25, 2002, the effective date of
the Joint Plan of Reorganization, loans approximating $83.5 million, secured by
20 hotel properties, were substantially reinstated on their original terms,
except for the extension of certain maturities. The terms of one loan, in the
amount of $2.5 million and secured by one hotel, were amended to provide for a
new interest rate as well as a new maturity date.

In addition, the Company received exit financing of $309 million arranged
with and through Merrill Lynch Mortgage Lending, Inc (Merrill), secured by 57
hotel properties. The agreement relating to the Senior and Mezzanine portion
of the exit financing which together approximated $302.7 million at
origination ($302.2 million at March 31, 2003) provides that when either the
Debt Yield (as defined) for the trailing 12-month period is below 12.75% during
the first year of the loan ending November 2003 (13.25% during the second year)
or the Debt Service Coverage Ratio (as defined) is below 1.20, excess cash
flows (after payment of operating expenses, management fees, required reserves,
principal and interest) produced by the 56 properties must be deposited in a
special deposit account. These funds cannot be transferred to the parent
company, but can be used for capital expenditures on these properties with
lenders approval, or for principal and interest payments. Funds placed into
the special deposit account are released to the borrowers when the Debt Yield
and the Debt Service Coverage Ratio are sustained above the minimum
requirements for three consecutive months. As of March 31, 2003, the Debt
Yield for the 56 properties was below the 12.75% threshold and, therefore, any
excess cash produced by the 56 properties will be retained in the special
deposit account until the Debt Yield increases above the minimum.

In March 2003, as permitted by the terms of the Senior and Mezzanine debt
agreements, Merrill exercised the right to resize the Senior and Mezzanine
debt amounts, prior to the securitization of the mortgage loan. As a result,
the principal amount of the Mortgage Loan was decreased from $223.5 million
(initially $224.0 less $0.5 million of principal payments) to $218.1 million,
and the initial principal amount of the Mezzanine Loan was increased from $78.7
million to $84.1 million. In connection with the resizing, the interest rates
on the Senior and Mezzanine debts were also modified to LIBOR plus 2.36% and
LIBOR plus 8.2546%, respectively.

The Company through its wholly owned subsidiaries owes approximately $11.4
million under Industrial Revenue Bonds (IRBs) issued on the Holiday Inn
Lawrence, Kansas and Holiday Inn Manhattan, Kansas properties. The IRBs
require a minimum debt service coverage ratio (DSCR) (as defined). For the
year ended December 31, 2002, the cash flows of the two properties were
insufficient to meet the minimum DSCR requirements due in part to renovations
that were being performed at the properties during 2002. The trustee of the
IRBs may give notice of default at which time the Company could remedy the
default by depositing with the trustee an amount currently estimated at less
than $1 million. In the event a default is declared and not cured, the
properties could be subject to foreclosure and the Company would be obligated
pursuant to a partial guaranty in an amount not to exceed $1.4 million. The
total revenues for these two hotels approximated $1.7 million and $1.5 million
for the First Quarter 2003 and 2002, respectively. The total approximate
contribution to corporate overheads, from management fees, approximated $69,000
and $60,000 for the First Quarter 2003 and 2002, respectively.

The Companys ability to make scheduled principal payments, to pay
interest, or to refinance its indebtedness depends on its future performance
and financial results, which, to a certain extent, are subject to general
conditions in or affecting the hotel and vacation industry and to the general
economic, political, financial, competitive, legislative and regulatory
environment. These factors, including the severity and duration of the current
economic downturn, are beyond the Companys control.

The terms of the Companys franchise agreements require each hotel to meet
certain quality and guest satisfaction standards. In addition, as part of the
reorganization process, the Company entered into stipulations with each of its
major franchisors setting forth a timeline as to completion of certain capital
expenditures. As of May 14, 2003, the Company had received termination notices
from franchisors with respect to seven properties (this does not include two
hotels for which the Company has met all of the requirements to cure but has
not yet received the cure letter from the franchisor). Also, the Company

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was not in strict compliance with the terms of eleven other franchise
agreements (this does not include four other hotels for which the Company has
met all of the requirements to cure but has not yet received the cure letter
from the franchisor).

As part of the Impac Plan of Reorganization, the Company has elected to
reject its license agreement relating to its hotel in Cincinnati, Ohio and to
cease operating this hotel as a Holiday Inn upon the effective date of the
Impac Plan of Reorganization.

The Company has a capital improvement program to address the capital
improvements required by the franchisors, the re-branding of several hotels and
general renovation projects intended to ultimately improve the operations of
the hotels. As of March 31, 2003, the anticipated expenditures for such
projects during the two years ending December 2004 are approximately $61.6
million, with approximately $15.1 million escrowed for such improvements. The
Company expects to fund its capital expenditures from a combination of amounts
escrowed for such expenditures, its current cash position and cash from
operations.

The Company intends to use its cash for ongoing operations, debt service
and capital expenditures and does not anticipate paying dividends on the new
common stock in the near future. The dividends on the preferred stock due
November 25, 2003 will be paid via the issuance of additional shares of
preferred stock. For the First Quarter 2003, the Company accrued $3.8 million
of the total preferred stock dividends due November 25, 2003. Net cash provided
by operating activities for the First Quarter 2003 totaled $6.9 million
compared to net cash provided by operating activities of $8.9 million for the
First Quarter 2002.

Until the claims distribution process is complete and the remaining
entities exit Chapter 11, the Company will continue to make payments in respect
of cash claims, professional costs relating to the entities in Chapter 11 and
professional fees relating to the distribution of shares.

For the First Quarter 2003, cash flows used in investing activities
approximated $4.9 million compared to $3.9 million for the First Quarter 2002.
Investing activities for both quarters consisted primarily of capital
expenditures on the Companys properties ($10.3 million and $2.7 million for
the First Quarter 2003 and 2002, respectively). The investment in capital
expenditure for the First Quarter 2003 was offset by net withdrawals from
capital expenditure escrows of $5.8 million while the investing activities for
the First Quarter 2002 were increased by net additions to capital expenditure
escrows of $1.2 million. Other investing activities for the First Quarter 2003
($0.4 million) consisted of other deposits and payments of franchise
application fees net of refunds.

Cash flows used in financing activities were $2.7 million for the First
Quarter 2003 and $0.7 million for the First Quarter 2002. Financing activities
for both quarters consisted primarily of payment of long term obligations ($2.4
million and $0.7 million for the First Quarter 2003 and 2002, respectively).
For the First Quarter 2003, investing activities also included $0.4 million
representing payments of deferred loan fees.

At March 31, 2003, the Company had a working capital deficit of $17.7
million compared with $9.6 million at December 31, 2002.

There can be no assurance that the Company will have sufficient liquidity
to be able to meet its capital expenditure or other requirements, and the
Company could lose the right to operate certain hotels under nationally
recognized brand names. Furthermore, the termination of one or more franchise
agreements could trigger a default under certain loan agreements as well as
obligations to pay liquidated damages under the franchise agreements. However,
management believes that the combination of its current cash position, cash
flows from operations, capital expenditure escrows and opportunistic asset
sales will be sufficient to meet its liquidity needs. Any projections of
future financial needs and sources of working capital are subject to
uncertainty. See Results of Operations and Forward-Looking Statements for
further discussion of conditions that could adversely affect
managements
estimates of future financial needs and sources of working capital.

20



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Inflation

The Company cannot determine the precise impact of inflation. However,
the Company believes that the rate of inflation has not had a material effect
on its revenues or expenses in recent years. It is difficult to predict
whether inflation will have a material effect on the Companys results in the
long-term.

Changes in Accounting Standards

See Note 11 in the Notes to the Condensed Consolidated Financial
Statements included in this Form 10-Q for a discussion of changes in accounting
standards.

Critical Accounting Policies

The Companys financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
(GAAP). The accounting policies followed for quarterly reporting are the same
as those disclosed in Note 1 of the Notes to Consolidated Financial Statements
included in the Companys Form 10-K for the year ended December 31, 2002. The
preparation of the financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. There can be no assurance that actual results will not differ
from these estimates. The Company believes the following to be its critical
accounting policies:

Capitalization and depreciable lives of assets

Capital improvements are capitalized when they extend the useful lives of
the related asset. Management estimates the depreciable lives of the Companys
fixed assets. All items considered to be repair and maintenance items are
expensed as incurred. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets (buildings and improvements 10-40
years; furnishings and equipment 3-10 years). Property under capital leases is
amortized using the straight-line method over the shorter of the estimated
useful lives of the assets or the lease term.

Revenue recognition

Revenues are recognized when the services are rendered. Revenues are
comprised of rooms, food and beverage and other revenues. Room revenues are
derived from guest room rentals, whereas food and beverage revenues primarily
include sales from hotel restaurants, room service, hotel catering and meeting
room rentals. Other revenues include charges for guests long-distance
telephone service, laundry and parking.

Asset impairment evaluation

Under GAAP, real estate assets are stated at the lower of depreciated cost
or fair value, if deemed impaired. As required by GAAP, the Company
periodically evaluates its real estate assets to determine if there has been
any impairment in carrying value and records impairment losses if there are
indicators of impairment and the undiscounted cash flows estimated to be
generated by those assets are less than the assets carrying amounts. In
connection with the Companys emergence from Chapter 11, and the application of
fresh start reporting, the Company recorded a net write-down of $222.1 million.

Income taxes

The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) 109 Accounting for Income Taxes, which requires
the use of the liability method of accounting for deferred income taxes. As a
result of the Companys history of losses, the Company has provided a full
valuation allowance against its deferred tax asset as it is more likely than
not that the deferred tax asset will not be realized.

Liabilities subject to compromise

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Liabilities subject to compromise refers to known liabilities incurred
prior to the commencement of the Chapter 11 cases, including those considered
by the Bankruptcy Court to be pre-petition claims. These liabilities consist
primarily of amounts outstanding under long-term debt and also include accounts
payable. These amounts represent the Companys estimate of known or potential
claims to be resolved in the Chapter 11 cases. Such claims remain subject to
future adjustments. Adjustments may result from (1) negotiations; (2) actions
of the Bankruptcy Court; (3) further development with respect to disputed
claims; (4) proofs of claim; or (5) other events.

The list of critical accounting policies above is not intended to be a
comprehensive list of all of the Companys accounting policies. In many cases,
the treatment of a particular transaction is specifically determined by
generally accepted accounting principles with no need for managements judgment
in selecting from alternatives which would provide different results.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risk inherent in the Companys market risk sensitive instruments is
the potential loss arising from adverse changes in interest rates. There have
been no meaningful changes in the Companys market risk sensitive instruments
since the filing of the Companys Annual Report on Form 10-K for the year ended
December 31, 2002.




ITEM 4. CONTROLS AND PROCEDURES



| | a) |  | Within the 90 days of the filing date of this report, certain
of the Companys management, under the supervision of the Chief
Executive Officer and the Chief Financial Officer, carried out an
evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to Exchange
Act Rule 13a-14 and Rule 15d  14. Based upon that evaluation, the
Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are
effective in timely alerting them to material information relating
to the Company required to be included in the Companys periodic
reports to the Securities and Exchange Commission.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | There have been no significant changes in the Companys
internal controls or in other factors that could significantly
affect these controls subsequent to the date of the evaluation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

As previously indicated in the Companys Annual Report on Form 10-K for
the year ended December 31, 2002, the Company and substantially all of its
subsidiaries which owned hotel properties filed for voluntary reorganization
under Chapter 11 of the Bankruptcy Code on December 20, 2001 in the United
States Bankruptcy Court for the Southern District of New York. The Bankruptcy
Court confirmed the Companys First Amended Joint Plan of Reorganization (the
Joint Plan of Reorganization) on November 5, 2002 and on November 25, 2002,
the Company and entities owning 78 hotels officially emerged from Chapter 11.
Pursuant to the terms of the Joint Plan of Reorganization, eight other
wholly-owned hotels were returned to the lender in early January 2003 in
satisfaction of outstanding debt obligations and one hotel (also wholly-owned)
was returned to the lessor of a capital lease.

Of the Companys 97 hotel portfolio, 18 hotels (the Impac Hotels) are
owned by two subsidiaries (the Impac Debtors) which were not part of the
Joint Plan of Reorganization and remain in Chapter 11. The Impac Hotels
represent approximately 19% of the Companys total hotel properties and 14% of
the Companys total hotel rooms as of May 12, 2003. The Impac Hotels
contributed approximately 12% and 13% of the Successor revenues for the three
months ended March 31, 2003 and the Predecessor revenues for the three months
ended March 31, 2002, respectively. All of the Impac Hotels received financing
prior to the bankruptcy filing from one lender which has a secured claim of
$109.0 million against the Impac Debtors secured by the Impac Hotels. The
Company and the Impac Debtors reached an agreement on October 21, 2002
(approved by the Bankruptcy Court on October 31, 2002) with such lender which
provides for a release of the hotel collateral in exchange for the payment by
the Impac Debtors of an agreed amount (the Impac Settlement Amount) by a date
no later than May 31, 2003. If the agreed amount is not paid by May 31, 2003,
the Impac Hotels will, consensually, be returned to the lender or disposed of
at the secured lenders direction. On April 24, 2003, the plan of
reorganization for the Impac Debtors (the Impac Plan of Reorganization) was
confirmed by the Bankruptcy Court pursuant to the terms of which the Company
and the Impac Debtors, through 18 newly-formed subsidiaries, will obtain
financing from Lehman Brothers Holdings Inc. (the Lehman Financing), which is
to be used to pay the Impac Settlement Amount. Although there can be no
assurance, the Company is hopeful that the Lehman Financing will be
successfully completed on or before May 31, 2003, and, accordingly, that the
Company will be able to retain the Impac Hotels.

The Company was a party in litigation with Hospitality Restoration and
Builders, Inc. (HRB), a general contractor hired to perform work on six of
the Companys hotels. The litigation involved hotels in Texas (filed in the
District Court of Harris County in October 1999), Illinois (in the United
States District Court, Northern District of Illinois, Eastern Division in
February 2000) and New York (filed in the Supreme Court, New York County in
July 1999). In general, HRB claimed that the Company breached contracts to
renovate the hotels by not paying for work performed. The Company contended
that it was over-billed by HRB and that a significant portion of the completed
work was defective. In July 2001, the parties agreed to settle the litigation
pending in Texas and Illinois. In exchange for mutual dismissals and full
releases, the Company paid HRB $750,000. With respect to the matter pending in
the state of New York, HRB claimed that it was owed $10.7 million. The Company
asserted a counterclaim of $7 million. In February 2003, the Company and HRB
agreed to settle the litigation pending in the state of New York. In exchange
for mutual dismissals and full releases, the Company agreed to pay HRB
$625,000. The Company provided fully for this liability in its Consolidated
Financial Statements for the year ended December 31, 2002.

The Company is party to other legal proceedings arising in the ordinary
course of business, the impact of which would not, either individually or in
the aggregate, in managements opinion, have a material adverse effect on its
financial position or results of operations. Certain of these claims are
limited to the amounts available under the Companys disputed claims reserve.




ITEM 2. CHANGES IN SECURITIES

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The Company intends to use its cash for ongoing operations, debt service
and capital expenditures and does not anticipate paying dividends on the new
common stock in the near future. The dividends on the preferred stock due
November 25, 2003 will be paid via the issuance of additional shares of
preferred stock.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------

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



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------

A report on Form 8-K was filed on January 28, 2003 relating to a press
release, announcing that Lodgian, Inc.s new common and preferred stocks had
been approved for listing on the American Stock Exchange.

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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.
|                   |  |               |  |                                                                     
|Date: May 15, 2003 |  | By:           |  | /s/ DAVID E. HAWTHORNE                                              
|                   |  |               |  |                                                                     
|                   |  |               |  | DAVID E. HAWTHORNE
President and Chief Executive Officer            
|                   |  |               |  |                                                                     
|Date: May 15, 2003 |  | By:           |  | /s/ RICHARD CARTOON                                                 
|                   |  |               |  |                                                                     
|                   |  |               |  | RICHARD CARTOON
Executive Vice President and Chief Financial Officer

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##### Table of Contents






Form of Sarbanes-Oxley Section 302 (a) Certification

I, David Hawthorne, certify that:



|1) |  | I have read this quarterly report on Form 10-Q of Lodgian, Inc;                                                                                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2) |  | based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact necessary in order to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this quarterly report;
|  
|3) |  | based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operation
and cash flows of the issuer as of, and for, the periods presented in
this quarterly report;
|  
|4) |  | the registrants other certifying officers and I:                                                                                                                                                                                                                                                     



| | a) |  | are responsible for establishing and maintaining
disclosure controls and procedures (as defined by Exchange Act
Rules 13a  14 and 15d  14) of the registrant                                    
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | have designed such disclosure controls and procedures
to ensure that material information is made known to them,
particularly during the period in which the quarterly report is
being prepared   
|
| | c) |  | have evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and
|
| | d) |  | have presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date                       



|5) |  | the registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
to the audit committee of the board of directors:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6) |  | the registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |     |  |                                                         
|------------------ |  | --- |  | --------------------------------------------------------
|Date: May 15, 2003 |  | By: |  | /s/ DAVID E. HAWTHORNE                                  
|                   |  |     |  |                                                         
|                   |  |     |  | DAVID E. HAWTHORNE
President and Chief Executive Officer

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##### Table of Contents






Form of Sarbanes-Oxley Section 302 (a) Certification

I, Richard Cartoon, certify that:



|1) |  | I have read this quarterly report on Form 10-Q of Lodgian, Inc;                                                                                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2) |  | based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact necessary in order to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this quarterly report;
|  
|3) |  | based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operation
and cash flows of the issuer as of, and for, the periods presented in
this quarterly report;
|  
|4) |  | the registrants other certifying officers and I:                                                                                                                                                                                                                                                     



| | a) |  | are responsible for establishing and maintaining
disclosure controls and procedures (as defined by Exchange Act
Rules 13a  14 and 15d  14) of the registrant                                    
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | have designed such disclosure controls and procedures
to ensure that material information is made known to them,
particularly during the period in which the quarterly report is
being prepared   
|
| | c) |  | have evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and
|
| | d) |  | have presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date                       



|5) |  | the registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
to the audit committee of the board of directors:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6) |  | the registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |     |  |                                                                     
|------------------ |  | --- |  | --------------------------------------------------------------------
|Date: May 15, 2003 |  | By: |  | /s/ RICHARD CARTOON                                                 
|                   |  |     |  |                                                                     
|                   |  |     |  | RICHARD CARTOON
Executive Vice President and Chief Financial Officer

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INDEX TO EXHIBITS

|        |  |   |  |                                                                                                                                                                                                                                 
|------- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |   |  |                                                                                                                                                                                                                                 
|NO.     |  |   |  | DESCRIPTION                                                                                                                                                                                                                     
|        |  |   |  |                                                                                                                                                                                                                                 
|10.56   |  |  |  | Post Confirmation Order and Notice for Joint Plan of
Reorganization of Impac Hotels II, L.L.C., and Impac hotels
III, L.L.C Together with the Official Committee of Unsecured
Creditors Under Chapter 11 of the Bankruptcy Code.
|10.57   |  |  |  | Joint Plan of Reorganization of Impac Hotels II, L.L.C. and
Impac Hotels III, L.L.C. Together with the Official Committee
of Unsecured Creditors Under Chapter 11 of the Bankruptcy Code.                                       
|10.58   |  |  |  | Disclosure Statement for Joint Plan of Reorganization of Impac
Hotels II, L.L.C. and Impac Hotels III, L.LC, Together with the
Official Committee of Unsecured Creditors Under Chapter 11 of
the Bankruptcy Code.               
|99.1    |  |  |  | Sarbanes  Oxley Section 906 certification by the CEO                                                                                                                                                                           
|99.2    |  |  |  | Sarbanes  Oxley Section 906 certification by the CFO                                                                                                                                                                           

28