10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Period ended March 31, 2005

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	(I.R.S. Employer
incorporation or organization)	Identification No.)
3445 Peachtree Road, N.E., Suite 700,
Atlanta, GA	30326
(Address of principal executive offices)	(Zip Code)

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

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

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

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

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

     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 1, 2005
Common	24,545,844

LODGIAN, INC. AND SUBSIDIARIES

INDEX

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004 (unaudited)		2
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and March 31, 2004 (unaudited)		3
	Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2005 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and March 31, 2004 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		40
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		40
Item 6.	Exhibits		40
Signatures			41
EX-10.38 AMENDMENT NO. 2 TO LODGIAN 401(K) PLAN
EX-10.39 AMENDMENT NO. 3 TO LODGIAN 401(K) PLAN
EX-10.40 LOAN MODIFICATION AGREEMENT
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2005			December 31, 2004
	(Unaudited in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	21,537		$	36,234
Cash, restricted		12,315			9,840
Accounts receivable (net of allowances: 2005 - $713; 2004 - $684)		10,613			7,967
Insurance receivable		3,225			3,280
Inventories		6,344			6,293
Prepaid expenses and other current assets		19,246			17,232
Assets held for sale		31,514			30,528
Total current assets		104,794			111,374
Property and equipment, net		571,441			569,371
Deposits for capital expenditures		39,522			34,787
Other assets		7,251			7,775
	$	723,008		$	723,307
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,765		$	10,957
Other accrued liabilities		34,621			31,475
Advance deposits		2,968			1,638
Insurance advances		17,834			2,000
Current portion of long-term liabilities		22,766			25,290
Liabilities related to assets held for sale		28,029			30,541
Total current liabilities		117,983			101,901
Long-term liabilities		383,935			393,143
Total liabilities		501,918			495,044
Minority interests		1,484			1,629
Commitments and contingencies Stockholders’ equity:
Stockholders’ equity:
Common stock, $.01 par value, 60,000,000 shares authorized; 24,579,255 issued at M arch 31, 2005 and December 31, 2004		246			246
Additional paid-in capital		306,906			306,943
Unearned stock compensation		(258	)		(315	)
Accumulated deficit		(89,026	)		(81,941	)
Accumulated other comprehensive income		1,814			1,777
Treasury stock, at cost, 7,211 shares at M arch 31, 2005 and December 31, 2004		(76	)		(76	)
Total stockholders’ equity		219,606			226,634
	$	723,008		$	723,307

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended
	March 31, 2005			March 31, 2004
	(Unaudited in thousands, except per share data)
Revenues:
Rooms	$	54,461		$	56,050
Food and beverage		14,901			16,227
Other		2,492			2,701
		71,854			74,978
Operating expenses:
Direct:
Rooms		15,494			15,457
Food and beverage		10,982			11,289
Other		1,930			1,931
		28,406			28,677
		43,448			46,301
Other operating expenses:
Other hotel operating costs		23,900			23,194
Property and other taxes, insurance, and leases		5,690			5,561
Corporate and other		4,658			4,335
Casualty losses		104			—
Depreciation and amortization		6,658			6,671
Impairment of long-lived assets		1,655			—
Other operating expenses		42,665			39,761
		783			6,540
Other income (expenses):
Interest income and other		171			43
Interest expense and other financing costs:
Preferred stock dividend		—			(4,285	)
Interest expense		(6,983	)		(8,024	)
Loss before income taxes and minority interests		(6,029	)		(5,726	)
Provision for income taxes — continuing operations		(67	)		(76	)
Minority interests		145			(147	)
Loss from continuing operations		(5,951	)		(5,949	)
Discontinued operations:
Loss from discontinued operations before income taxes		(1,134	)		(1,137	)
Income tax benefit		—			—
Loss from discontinued operations		(1,134	)		(1,137	)
Net loss attributable to common stock	$	(7,085	)	$	(7,086	)
Basic and diluted loss per common share:
Net loss attributable to common stock	$	(0.29	)	$	(3.04	)

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

														Accumulated
					Additional			Unearned						Other					Total
	Common Stock				Paid-In			Stock			Accumulated			Comprehensive		Treasury			Stockholders’
	Shares		Amount		Capital			Compensation			Deficit			Income		Stock			Equity (Deficit)
								(Unaudited in thousands, except share data)
Balance December 31, 2004		24,579,255	$	246	$	306,943		$	(315	)	$	(81,941	)	$	1,777	$	(76	)	$	226,634
Amortization of unearned stock compensation									57											57
Cost relating to issuance of new common stock in 2004						(37	)													(37	)
Comprehensive loss:																				—
Net loss												(7,085	)							(7,085	)
Currency translation adjustments (related taxes estimated at nil)															37					37
Total comprehensive loss																				(7,048	)
Balance March 31, 2005		24,579,255	$	246	$	306,906		$	(258	)	$	(89,026	)	$	1,814	$	(76	)	$	219,606

The comprehensive loss for the three months ended March 31, 2004 was $7.1 million.

Accumulated Other Comprehensive Income represents currency translation adjustments.

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31, 2005			March 31, 2004
	(Unaudited in thousands)
Operating activities:
Net loss	$	(7,085	)	$	(7,086	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		6,770			6,938
Impairment of long-lived assets		3,545			2,153
Amortization of unearned stock compensation		57			50
Preferred stock dividends		—			4,285
Casualty losses		104			—
Minority interests		(145	)		147
Gain on asset dispositions		(2,002	)		(3,007	)
Write-off and amortization of deferred financing costs		367			1,818
Other		(389	)		(128	)
Changes in operating assets and liabilities:
Accounts receivable, net of allowances		(2,772	)		(3,128	)
Insurance receivable		55			—
Inventories		(192	)		244
Prepaid expenses, other assets and restricted cash		(4,454	)		(659	)
Accounts payable		479			560
Other accrued liabilities		3,891			2,494
Advance deposits		1,429			1,432
Net cash (used by) provided by operating activities		(342	)		6,113
Investing activities:
Capital improvements		(19,649	)		(5,001	)
Proceeds from sale of assets, net of related selling costs		9,024			13,983
(Deposits) withdrawals for capital expenditures		(4,735	)		2,205
Insurance advances related to hurricanes		15,834			—
Other		(11	)		(42	)
Net cash provided by investing activities		463			11,145
Financing activities:
Proceeds from exercise of stock options and issuance of common stock		—			4
Principal payments on long-term debt		(14,698	)		(14,936	)
Payments of deferred financing costs		(111	)		(561	)
Net cash used in financing activities		(14,809	)		(15,493	)
Effect of exchange rate changes on cash		(9	)		—
Net increase (decrease) in cash and cash equivalents		(14,697	)		1,765
Cash and cash equivalents at beginning of period		36,234			10,897
Cash and cash equivalents at end of period	$	21,537		$	12,662
Supplemental cash flow information:
Cash paid during the period for:
Interest, net of the amounts capitalized shown below	$	6,878		$	7,561
Interest capitalized		481			75
Income taxes, net of refunds		88			234
Supplemental disclosure of non-cash investing and financing activities:
Net non-cash debt (decrease) increase		(32	)		44
Issuance of promissory notes as consideration for taxation liabilities		—			2,369

See notes to condensed consolidated financial statements.

5

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

1. Business Summary

     We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms, as reported by Hotel Business in the 2005 Green Book issue published in December 2004. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn,” “Marriott,” and “Hilton.” As of May 1, 2005, we operated 83 hotels with an aggregate of 15,681 rooms, located in 31 states and Canada. Of the 83 hotels, 76 hotels, with an aggregate of 13,718 rooms, are part of our continuing operations, while seven hotels, with an aggregate of 1,963 rooms, are held for sale. Three of the seven hotels with an aggregate of 736 rooms were identified for sale in January 2005. Our current portfolio of 83 hotels consists of:

•   78 hotels that we wholly own and operate through subsidiaries;

•   four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control (see subsequent events for discussion on buyout of joint venture partner at one of these hotels); and

•   one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

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

     Our hotels are primarily full-service properties that offer food and beverage services, meeting space and banquet facilities and compete in the midscale and upscale market segments of the lodging industry. As of May 1, 2005, we operated all but three of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operate 55 of our hotels under franchises obtained from InterContinental Hotels Group as franchisor of the Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express brands. We operate 16 of our hotels under franchises from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott and Residence Inn by Marriott brands. We operate another 9 hotels under other nationally recognized brands. We believe that these strong national brands afford us many benefits such as guest loyalty and market share premiums.

2. General

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

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     The accounting policies which we follow for quarterly financial reporting are the same as those which we disclosed in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2004.

     During 2003, we developed a portfolio improvement strategy which was consistent with our goals of operating a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In accordance with this strategy and our efforts to reduce debt and interest costs, we identified 19 hotels, one office building and three land parcels for sale. In January 2005, we classified an additional three hotels as held for sale. Between November 1, 2003 and March 31, 2005, we sold the office building, 15 of the 22 hotels and two of the three land parcels. As of March 31, 2005, our hotel portfolio consisted of 83 hotels, 76 of which represent our continuing operations portfolio (including one hotel in which we have a non-controlling equity interest which we do not consolidate). We believe that our held for sale assets as of March 31, 2005 remain properly classified in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

     In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2005, the results of our operations for the three months ended March 31, 2005 and March 31, 2004 and our cash flows for the three months ended March 31, 2005 and March 31, 2004. Our results for interim periods are not necessarily indicative of our results for the entire year. You should read these financial statements in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2004.

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

•   the reported amounts of assets and liabilities;

•   the reported amounts of revenues and expenses during the reporting period; and

•   the disclosures of contingent assets and liabilities at the date of our financial statements.

     Our actual results could differ from our estimates.

Stock-based Compensation

     As we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2004, on November 25, 2002, we adopted a new Stock Incentive Plan which replaced the stock option plan previously in place. In accordance with the Stock Incentive Plan, and prior to the completion of our public offering of common stock on June 25, 2004, we were permitted to grant awards to acquire up to 353,333 shares of common stock to our directors, officers, or other key employees or consultants as determined by a committee appointed by our Board of Directors. Awards may consist of stock options, stock appreciation rights, stock awards, performance share awards, section 162(m) awards or other awards determined by the committee. We cannot grant stock options pursuant to the Stock Incentive Plan at an exercise price which is less than 100% of the fair market value per share on the date of the grant. Vesting, exercisability, payment and other restrictions pertaining to any awards made pursuant to the Stock Incentive Plan are determined by the Committee. At our 2004 annual meeting, stockholders approved an amendment and restatement of the Stock Incentive Plan to, among other things, increase the number of shares of common stock available for issuance thereunder by 29,667 immediately and, in the event we consummated a firm commitment, underwritten public offering of our common stock, by an additional amount to be determined pursuant to a formula. With the completion of our public offering of common stock on June 25, 2004, the total number of shares available for issuance under our Stock Incentive Plan increased to 3,301,058 shares.

     On April 9, 2004, the Company issued to our CEO, Thomas Parrington, 1,382 restricted stock units in accordance with his employment agreement. The restricted stock units vested on April 9, 2005 and were converted into an equal number of shares of common stock. On July 15, 2004, 22,222 restricted stock units previously issued

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to Mr. Parrington vested. Pursuant to the terms of his restricted unit award agreement, Mr. Parrington elected to have the Company withhold an appropriate number of vested shares to satisfy the employment tax withholding requirements associated with the vesting of the restricted units. Accordingly, 7,211 shares were withheld and deemed repurchased by the Company, thereby resulting in the reporting of treasury stock in our Condensed Consolidated Statement of Stockholders’ Equity.

     On January 31, 2005, we signed an employment contract with our newly promoted Chief Financial Officer, and pursuant to the agreement issued options to purchase 25,000 shares of our common stock with an exercise price of $11.72 per share, the average of the opening and closing prices of our shares on the date of the grant.

     We present below a summary of our stock option plan and the restricted stock units activity under the plan for the three months ended March 31, 2005:

				Weighted Average
	Options			Exercise Price
Balance, December 31, 2004		526,410			$11.46
Granted		32,500			11.78
Exercised		—			—
Forfeited		(7,971	)		11.53
Balance, March 31, 2005		550,939			$11.47

	Restricted
	stock
Balance, December 31, 2004		45,827
Granted		—
Shares converted to common stock		—
Forfeited		—
Balance, March 31, 2005		45,827

     In the following table, we summarize information for options outstanding and exercisable at March 31, 2005:

	Options outstanding					Options exercisable
			Weighted average	Weighted average				Weighted average
Range of prices	Number		remaining life (in years)	exercise prices		Number		exercise prices
$9.00 to $10.50		33,333	8.3		$  9.00		11,111		$  9.00
$10.51 to $15.00		404,250	9.3		$10.62		—		$11.19
$15.01 to $15.50		106,190	8.4		$15.21		71,033		$15.21
$15.51 to $16.00		7,166	8.5		$15.66		4,778		$15.66
		550,939	9.1		$11.47		86,922		$14.44

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

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

	Three Months ended
	March 31, 2005			March 31, 2004
	($ in thousands, except share data)
Loss from continuing operations:
As reported	$	(5,951	)	$	(5,949	)
Add: Stock-based compensation expense included in net income		57			50
Deduct: Total pro forma stock-based employee compensation expense		(508	)		(175	)
Pro forma		(6,402	)		(6,074	)
Loss from discontinued operations:
As reported		(1,134	)		(1,137	)
Add: Stock-based compensation expense included in net income		—			—
Deduct: Total pro forma stock-based employee compensation expense		—			—
Pro forma		(1,134	)		(1,137	)
Net Loss attributable to common stock:
As reported		(7,085	)		(7,086	)
Add: Stock-based compensation expense included in net income		57			50
Deduct: Total pro forma stock based employee compensation expense		(508	)		(175	)
Pro forma	$	(7,536	)	$	(7,211	)
Basic and diluted loss per common share
Loss from continuing operations:
As reported	$	(0.24	)	$	(2.55	)
Add: Stock-based compensation expense included in net income		—			0.02
Deduct: Total pro forma stock-based employee compensation expense		(0.02	)		(0.08	)
Pro forma		(0.26	)		(2.61	)
Loss from discontinued operations:
As reported		(0.05	)		(0.49	)
Add: Stock-based compensation expense included in net income		—			—
Deduct: Total pro forma stock-based employee compensation expense		—			—
Pro forma		(0.05	)		(0.49	)
Net Loss attributable to common stock:
As reported		(0.29	)		(3.04	)
Add: Stock-based compensation expense included in net income		—			0.02
Deduct: Total pro forma stock-based employee compensation expense		(0.02	)		(0.08	)
Pro forma	$	(0.31	)	$	(3.10	)

3. Discontinued Operations

     As discussed above, during 2003, we identified 19 hotels, one office building and three land parcels for sale as part of our portfolio improvement strategy and our efforts to reduce debt and interest costs. In January 2005, we identified three additional hotels as held for sale. Between January 1, 2005 and March 31, 2005, we sold three hotels for an aggregate sales price of $9.5 million. From the sale of these assets, we paid down debt of approximately $9.1 million.

     At December 31, 2004, seven hotels and one land parcel were held for sale. In January 2005, we identified three additional hotels as held for sale. Between January 1, 2005 and March 31, 2005, we sold three of the hotels that were held for sale. Accordingly, at March 31, 2005, seven hotels and one land parcel were held for sale.

     Management considers an asset held for sale when the following criteria per SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) are met:

a)   Management commits to a plan to sell the asset;

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b)	The asset is available for immediate sale in its present condition;
c)	An active marketing plan to sell the asset has been initiated at a reasonable price;
d)	The sale of the asset is probable within one year; and
e)	It is unlikely that significant changes to the plan to sell the asset will be made.

     Upon designation of a property as an asset held for sale and in accordance with the provisions of SFAS No. 144, the Company records the carrying value of the property at the lower of its carrying value or its estimated fair market value, less estimated selling costs, and the Company ceases depreciation of the asset.

     All losses and gains on assets sold and held for sale (including any related impairment charges) are included in “(Loss) income from discontinued operations before income taxes” in the Consolidated Statement of Operations. All assets held for sale and the liabilities related to these assets are separately disclosed in the Consolidated Balance Sheet. The amount the Company will ultimately realize could differ from the amount recorded in the financial statements.

     In accordance with SFAS No. 144, we have included the hotel assets sold during 2004 and 2005 as well as the hotel assets held for sale at March 31, 2005 (including any related impairment charges) in Discontinued Operations in the Consolidated Statements of Operations. The assets held for sale at March 31, 2005 and December 31, 2004 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets.

     The fair value of assets held for sale are based on the estimated selling prices less estimated costs to sell. We determined the estimated selling prices in conjunction with our real estate brokers. The estimated selling costs are based on our experience with similar asset sales. During the three months ended March 31, 2005 and March 31, 2004, we recorded impairment charges of $1.9 million and $2.2 million, respectively, on assets held for sale as follows:

     Consistent with our accounting policy on asset impairment, and in accordance with SFAS No. 144, the reclassification of assets from held for use to held for sale necessitates a determination of fair value less costs of sale. The fair values of the assets held for sale are based on the estimated selling prices less estimated costs to sell. We determined the estimated selling prices in conjunction with our real estate brokers. The estimated selling costs are based on our experience with similar asset sales. We record impairment charges and write down respective hotel asset carrying values if their carrying values exceed the estimated selling prices less costs to sell. The impairment of long-lived assets held for sale of $1.9 million recorded in the first quarter 2005 represents the write-down of four hotels and one land parcel held for sale, the written-off net book value of assets held for sale that were replaced in the first quarter 2005 and adjustments to recapture previously recorded impairment on two hotels as outlined below:

a)	an additional $0.3 million on the Holiday Inn Express Gadsden, AL to reflect the estimated selling costs of this sale as this hotel was identified for sale in January 2005 and to reflect the write-off of capital improvements spent on this hotel for franchisor compliance that did not add incremental value or revenue generating capacity to the property;
b)	an additional $1.0 million on the Holiday Inn Rolling Meadows, IL to reflect the lowered estimated selling price of the hotel;
c)	an additional $0.3 million on the Holiday Inn Morgantown, WV to reflect the reduced selling price and the additional charges to dispose of this hotel in February 2005; and
d)	an additional $0.4 million on the Mt. Laurel, NJ land parcel to reflect the lowered estimated selling of the land parcel.

     The impairment of long-lived assets held for sale of $2.2 million recorded in first quarter 2004 represents the write-down of five hotels held for sale. As a result of these evaluations, during the first quarter of 2004 we recorded impairment losses as follows:

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a)	$0.1 million on the Holiday Inn Express Pensacola, FL to record the loss on sale as this hotel was sold in March 2004;
b)	$0.3 million on the Downtown Plaza Hotel Cincinnati, OH as this hotel was listed for sale in the second quarter 2003. Impairment was recorded to adjust for the further reduction in the estimated selling price of this hotel; and
c)	$1.7 million on the Holiday Inn Rolling Meadows, IL as this hotel was identified for sale in the second quarter 2003. Impairment was recorded to adjust for the further reduction in the estimated selling price of the hotel.

     We have changed the method for preparing the cash flow statement to combine cash flows for continuing and discontinued operations. All prior periods were changed to reflect this change in presentation. Discontinued operations have not been segregated in the consolidated statement of cash flows.

     Assets related to discontinued operations consist primarily of real estate, net of accumulated depreciation. Liabilities related to discontinued operations consist primarily of mortgage notes payable. The following is a summary of the balance sheet information for discontinued operations:

	March 31, 2005		December 31, 2004
	(Unaudited in thousands)
Total assets	$	31,514	$	30,528
Total liabilities	$	28,029	$	30,541

     The following is a summary of consolidated statements of operations information for discontinued operations:

	March 31, 2005			March 31, 2004
	(Unaudited in thousands)
Total Revenues	$	6,207		$	12,567
Total Expenses		9,343			16,712
Gain on asset dispositions		2,002			3,008
Loss from discontinued operations	$	(1,134	)	$	(1,137	)

4. Cash, Restricted

     At March 31, 2005, our $12.3 million of restricted cash consisted of amounts reserved for letter of credit collateral, a deposit required by our bankers, and cash reserved pursuant to certain loan agreements.

5. Loss Per Share

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

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	Three Months Ended
	March 31, 2005			March 31, 2004
	(In thousands, except per share data)
Basic and diluted loss per share:
Numerator:
Loss from continuing operations	$	(5,951	)	$	(5,949	)
Loss from discontinued operations		(1,134	)		(1,137	)
Net loss attributable to common stock	$	(7,085	)	$	(7,086	)
Denominator:
Denominator for basic and diluted loss per share - weighted-average shares		24,572			2,333
Basic and diluted loss per common share:
Loss from continuing operations	$	(0.24	)	$	(2.55	)
Loss from discontinued operations		(0.05	)		(0.49	)
Net loss attributable to common stock	$	(0.29	)	$	(3.04	)

     We did not include the shares associated with the assumed conversion of the restricted stock units (45,826 shares) or the exercise of stock options (options to acquire 550,939 shares of common stock) and A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) in the computation of diluted loss per share for the three months ended March 31, 2005 because their inclusion would have been antidilutive. We did not include the shares associated with the assumed conversion of the restricted stock units (66,666 shares) or the exercise of stock options (options to acquire 154,124 shares of common stock) and A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) in the computation of diluted loss per share for the three months ended March 31, 2004 because their inclusion would have been antidilutive.

6. Debt

     At March 31, 2005 and December 31, 2004, long-term liabilities consisted of the following:

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	March 31,			December 31,
	2005			2004
	($ in thousands)
Refinancing Debt
Merrill Lynch Mortgage Lending, Inc. — Floating	$	93,212		$	102,617
Merrill Lynch Mortgage Lending, Inc. — Fixed		257,350			258,410
Merrill Lynch Mortgage Lending, Inc. — Total		350,562			361,027
Computer Share Trust Company of Canada		7,703			7,843
Other Financings
Column Financial, Inc.		24,460			25,058
Lehman Brothers Holdings, Inc.		22,799			22,927
JP Morgan Chase Bank, Trustee		10,064			10,110
DDL Kinser		2,260			2,286
Column Financial, Inc.		8,475			8,545
Column Financial, Inc.		—			3,069
Tax notes issued pursuant to Lodgian’s Joint Plan of Reorganization		3,097			3,302
Total — Other Financings		71,155			75,297
Long-term liabilities — other
Other long-term liabilities		1,829			1,865
		1,829			1,865
		431,249			446,032
Long-term liabilities related to assets held for sale		(24,548	)		(27,599	)
	$	406,701		$	418,433
Less: Current portion of long-term liabilities		(22,766	)		(25,290	)
Total long-term liabilities — continuing operations	$	383,935		$	393,143

     Substantially all of our property and equipment are pledged as collateral for long-term obligations with the exception of five hotels and one land parcel, of which three of these five hotels and the land parcel are classified as held for sale. Certain of our mortgage notes are subject to a prepayment or yield maintenance penalty if we repay them prior to their maturity. Set forth below, by debt pool, is a summary of our debt at March 31, 2005 along with the applicable interest rates and the related carrying values of the property, plant and equipment which collateralize these debts:

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				March 31, 2005
	Number			Property, plant			Long-term			Interest
	of Hotels			and equipment, net (1)			obligations (1)			rates
Refinancing Debt
Merrill Lynch Mortgage Lending, Inc. - - Floating		23		$	111,995		$	93,212		LIBOR plus 3.40%
Merrill Lynch Mortgage Lending, Inc. - - Fixed		35			319,764			257,350		6.58%
Merrill Lynch Mortgage Lending, Inc. — Total		58			431,759			350,562
Computershare Trust Company of Canada		1			16,772			7,703		7.88%
Other Financings
Column Financial, Inc.		9			69,317			24,460		10.59%
Lehman Brothers Holdings, Inc.		5			39,636			22,799		$16,063 at 9.40%; $6,736 at 8.90%
JP Morgan Chase Bank		2			6,217			10,064		8.00%
DDL Kinser		1			3,105			2,260		8.25%
Column Financial, Inc.		1			11,883			8,475		9.45%
Total — other financing		18			130,158			68,058
		77			578,689			426,323		7.01%(2)
Long-term liabilities — other
Tax notes issued pursuant to our Joint Plan of Reorganization		—			—			3,097
Other		—			—			1,829
		—			—			4,926
Property, plant and equipment — other		5			22,900			—
		82			601,589			431,249
Held for sale		(7	)		(29,311	)		(24,548	)
Total March 31, 2005 (3)		75		$	572,278		$	406,701

(1)	Debt obligations and property, plant and equipment of one hotel in which we have a non-controlling equity interest that we do not consolidate are excluded from the table above.
(2)	The 7.01% in the table above represents our annual weighted average cost of debt at March 31, 2005, using a LIBOR of 2.87%.
(3)	Debt obligations at March 31, 2005 include the current portion.

Mortgage Debt

     On June 25, 2004, we closed on the $370 million Merrill Lynch Mortgage Lending, Inc. (“Merrill Lynch Mortgage”) refinance (“Refinancing Debt”) secured by 64 of our hotels, of which, as of May 1, 2005, six hotels have since been sold. We refinanced (1) our outstanding mortgage debt (“Merrill Lynch Exit Financing”) with Merrill Lynch Mortgage which, as of June 25, 2004, had a balance of $290.9 million, (2) certain of our outstanding mortgage debt (the “Lehman Financing”) with Lehman Brothers Holdings, Inc. (“Lehman”) which, as of June 25, 2004, had a balance of $56.1 million, and (3) our outstanding mortgage debt on the Crowne Plaza Hotel in Macon, Georgia, in which we own a 60% interest that, as of June 25, 2004, had a balance of $6.9 million.

     Immediately after closing, the Refinancing Debt consisted of a loan of $110 million bearing a floating rate of interest (the “Floating Rate Debt”), presently secured by 23 of our hotels (29 hotels at the loan’s inception), and four loans totaling $260 million, each bearing a fixed interest rate of 6.58% (the “Fixed Rate Debt”) and secured, in the aggregate, by 35 of our hotels. Merrill Lynch Mortgage also has the right to further divide the Refinancing Debt into first priority mortgage loans and mezzanine loans.

     Each of the four fixed rate loans (“Fixed Rate Loan”) comprising the Fixed Rate Debt is a five-year loan and bears a fixed rate of interest of 6.58%. Except for certain defeasance provisions, we may not prepay the Fixed Rate Debt except during the 60 days prior to maturity. We may, after the earlier of 48 months after the closing of any Fixed Rate Debt or the second anniversary of the securitization of any Fixed Rate Debt, defease such Fixed Rate Debt, in whole or in part.

     As a result of a modification in the terms of the Floating Rate Loan as outlined in the subsequent events note (see Subsequent Events), the Floating Rate Debt has an initial maturity of January 2007. The Floating Rate Debt is a two-year loan with three one-year extension options and bears interest at LIBOR plus 3.40%. The first extension option will be available to us only if no defaults exist and we have entered into the requisite interest rate cap agreement. The second and third extension options will be available to us only if no defaults exist, a minimum debt yield ratio of 13% is met, and minimum debt service coverage ratios of 1.3x for the second extension and 1.35x for the third extension are met. An extension fee of 0.25% of the outstanding Floating Rate Debt is payable if we opt to

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exercise each of the second and third extensions. We may prepay the Floating Rate Debt in whole or in part, subject to a prepayment penalty in the amount of 3% of the amount prepaid during the first year of the loan and 1% of the amount prepaid during the second year of the loan. Repayments of debt related to assets held for sale at June 25, 2004, are exempt from the prepayment penalty.

     The Refinancing Debt provides that when either (i) the debt yield ratio for the hotels securing the Floating Rate Debt or any Fixed Rate Loan for the trailing 12-month period is below 9% during the first year, 10% during the second year and 11%, 12% and 13% during each of the next three years (in the case of the Floating Rate Debt to the extent extended), or (ii) in the case of the Floating Rate Debt (to the extent extended), the debt service coverage ratio is less than 1.30x in the fourth year or 1.35x in the fifth year, excess cash flows produced by the mortgaged hotels securing the applicable loan (after payment of operating expenses, management fees, required reserves, service fees, principal and interest) must be deposited in a restricted cash account. These funds can be used for the prepayment of the applicable loan in an amount required to satisfy the applicable test, capital expenditures reasonably approved by the lender with respect to the hotels securing the applicable loan, and scheduled principal and interest payments due on the Floating Rate Debt of up to $0.9 million or any Fixed Rate Loan of up to $525,000, as applicable. Funds will no longer be deposited into the restricted cash account when the debt yield ratio and, if applicable, the debt service coverage ratio are sustained above the minimum requirements for three consecutive months and there are no defaults.

          If the Company does not comply with the terms of a franchise agreement, following notice and an opportunity to cure, the franchisor has the right to terminate the agreement, which could lead to a default under one or more of its loan agreements and which could materially and adversely affect the Company. If a franchise agreement is terminated, the Company will either select an alternative franchisor or operate the hotel independently of any franchisor. However, terminating or changing the franchise affiliation of a hotel could require the Company to incur significant expenses, including franchise termination payments and capital expenditures associated with the change of a brand. Moreover, the loss of a franchise agreement could have a material adverse effect upon the operations or the underlying value of the hotel covered by the franchise because of the loss of associated guest loyalty, name recognition, marketing support and centralized reservation systems provided by the franchisor. Loss of a franchise agreement may result in a default under, and acceleration of, the related mortgage debt. In particular, the Company would be in default under the Refinancing Debt if the Company experiences either:

•   multiple franchise agreement defaults and the continuance thereof beyond all notice and grace periods for hotels whose allocated loan amounts total 10% or more of the outstanding principal amount of such Refinancing Debt;

•   with regards to the Merrill Lynch Mortgage floating rate refinancing debt (“Floating Rate Debt”), either the termination of franchise agreements for more than two properties or the termination of franchise agreements for hotels whose allocated loan amounts represent more than 5% of the outstanding principal amount of the floating rate debt, and such hotels continue to operate for more than five consecutive days without being subject to replacement franchise agreements;

•   with regards to the Merrill Lynch Mortgage fixed rate refinancing debt (“Fixed Rate Debt”), either the termination of franchise agreements for more than one property or the termination of franchise agreements for hotels whose allocated loan amounts represent more than 5% of the outstanding principal amount of the fixed rate loan, and such hotels continue to operate for more than five consecutive days without being subject to replacement franchise agreements; or

•   a franchise termination for any hotel currently subject to a franchise agreement that remains without a franchise agreement for more than six months.

          A single franchise agreement termination could materially and adversely affect the Company’s revenues, cash flow and liquidity.

     As of March 31, 2005, our debt yield ratios were above the minimum requirement for the four Fixed Rate Loans; however, we did not meet the required debt yield ratio with regard to the Floating Rate Loan. As a result, all excess cash generated by the assets that secure this floating rate loan may be placed into a restricted cash account, at the option of the lender, and these restricted funds can be used for prepayment of the loan, capital expenditures, or scheduled principal and interest payments up to $0.9 million as designated above. Funds will no longer be retained in the restricted cash account when the debt yield ratio is sustained above the minimum requirement for three

15

consecutive months. As of March 31, 2005, the lender had not elected to invoke the cash trap provision. Accordingly, as of March 31, 2005, no funds were in the restricted cash account for this purpose.

     Each loan comprising the Refinancing Debt is non-recourse; however, we have agreed to indemnify Merrill Lynch Mortgage in certain situations, such as fraud, waste, misappropriation of funds, certain environmental matters, asset transfers in violation of the loan agreements, or violation of certain single-purpose entity covenants. In addition, each loan comprising the Refinancing Debt will become full recourse in certain limited cases such as bankruptcy of a borrower or Lodgian. During the term of the Refinancing Debt, we will be required to fund, on a monthly basis, a reserve for furniture, fixtures and equipment equal to 4% of the previous month’s gross revenues from the hotels securing each of the respective loans comprising the Refinancing Debt.

     Other loan costs incurred as a part of the Refinancing Debt, totaling $5.4 million, were deferred and are being amortized using the effective yield method over five years for the Fixed Rate Debt and three years for the Floating Rate Debt.

     As of March 31, 2005, we were not in compliance with the debt service coverage ratio requirement of the loan from Column Financial secured by nine of our hotels, primarily due to the fact that one of the hotels securing this loan (New Orleans Airport Plaza Hotel) is not currently affiliated with a national brand and is undergoing a major renovation. We have entered into a franchise agreement with Radisson Hotels International, Inc. to rebrand this property as a Radisson hotel and expect to complete the renovation and open the hotel as a Radisson during the second quarter of 2005. The total investment we are making on the renovation of this property and its rebranding is $5.5 million. In addition, we will be completing capital expenditures of approximately $8.9 million on three other hotels in this loan pool in 2005 and $0.5 million in 2006 to complete the renovation of one of these hotels.

     Under the terms of the Column Financial loan agreement until the required DSCR is met, the lender is permitted to require the borrowers to deposit all revenues from the mortgaged properties into an account controlled by the lender. The revenues are then disbursed to pay property expenses in accordance with the loan agreement. The lender may apply excess proceeds after payment of expenses to additional principal payments. However, as of May 1, 2005, the lender has not elected to require revenue for these properties to be deposited into its account.

     Additionally, as of March 31, 2005, the Company was not in compliance with the debt service coverage ratio requirement of the loan from Column Financial secured by one of its hotels in Phoenix, Arizona. The primary reason why the debt service coverage ratio is below the required threshold is due to the property undergoing an extensive renovation in 2004 in order to convert from a Holiday Inn Select to a Crowne Plaza. The renovation caused substantial revenue displacement which, in turn, negatively affected the financial performance of this hotel. Under the terms of the Column Financial loan agreement until the required DSCR is met, the lender is permitted to require the borrower to deposit all revenues from the mortgaged property into an account controlled by the lender. Accordingly, in December 2004, the Company was notified by the lender that it was not in compliance with the debt service coverage ratio requirement and would have to establish a restricted cash account whereby all cash generated by the property be deposited in an account from which all payments of interest, principal, operating expenses and escrows (insurance, property taxes and ground rent) would be disbursed. The lender may apply excess proceeds after payment of expenses to additional principal payments.

     Through our wholly-owned subsidiaries, we owe approximately $10.1 million under industrial revenue bonds secured by the Holiday Inns Lawrence, Kansas and Manhattan, Kansas hotels. For the year ended December 31, 2004, the cash flows of the two hotels were insufficient to meet the minimum debt service coverage ratio requirements. On March 2, 2005, we notified the trustee of the industrial revenue bonds which finance the Holiday Inns in Lawrence, Kansas and Manhattan, Kansas that we would not continue to make debt service payments. The Holiday Inn franchise agreements for both of these hotels expire on August 28, 2005, and each of these properties has a substantial amount of deferred capital expenditures. The failure to make debt service payments is a default under the bond indenture and also a default under the ground leases for these properties. The Company may attempt to restructure the debt on these hotels, but no assurance can be given that a restructuring will be successful. The failure to make the bond payments subjects these hotels to foreclosure and we could be obligated pursuant to a partial guaranty of approximately $1.4 million. In addition, we could be obliged to pay our franchisor liquidated damages in the amount of $0.2 million. We have classified this debt to current liabilities because the debt became callable on March 2, 2005, when we did not make the March 1, 2005 debt service payment.

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     Loan approximating $83.5 million, secured by 20 hotels, were substantially reinstated on their original terms, except for the extension of certain maturities when the Company emerged from Chapter 11 in November 2002. The terms of one other loan, in the amount of $2.5 million and secured by one hotel, were amended to provide for a new interest rate and a new maturity date.

     At March 31, 2005, approximately 82.9% of our continuing operations mortgage debt (including current portion) bears interest at fixed rates and 17.1% bears interest at a floating rate.

7. Commitments and Contingencies

Franchise Agreements and Capital Expenditures

     We benefit from the superior brand qualities of Crowne Plaza, Holiday Inn, Marriott, Hilton and other brands. Included in the benefits of these brands are their reputation for quality and service, revenue generation through their central reservation systems, access to revenue through the global distribution systems, guest loyalty programs and brand Internet booking sites. Reservations made by means of these franchisor facilities generally account for approximately 35% of our total reservations.

     To obtain these franchise affiliations, we enter into franchise agreements with hotel franchisors that generally have terms of between 5 and 20 years. The franchise agreements typically authorize us to operate the hotel under the franchise name, at a specific location or within a specified area, and require that we operate a hotel in accordance with the standards specified by the franchisor. As part of our franchise agreements, we are generally required to pay a royalty fee, an advertising/marketing fee, a fee for the use of the franchisor’s nationwide reservation system and certain ancillary charges. Royalty fees generally range from 2.7% to 6.0% of gross room revenues, advertising/marketing fees generally range from 1.0% to 4.2% of gross room revenues, reservation system fees generally range from 1.0% to 2.6% of gross room revenues and club and restaurant fees range from 0% to 4.5%. In the aggregate, royalty fees, advertising/marketing fees, reservation fees and other ancillary fees for the various brands under which we operate our hotels range from 5.1% to 11.0% of gross room revenues.

     These costs vary with revenues and are not fixed commitments. Franchise fees incurred (which are reported in other hotel operating costs on our Condensed Consolidated Statement of Operations) for the three months ended March 31, 2005 and March 31, 2004 were as follows:

	Three Months Ended
	March 31, 2005		March 31, 2004
	($ in thousands)
Continuing operation	$	4,933	$	5,107
Discontinued operations		424		732
	$	5,357	$	5,839

     During the term of the franchise agreements, the franchisors may require us to upgrade facilities to comply with their current standards. Our current franchise agreements terminate at various times and have differing remaining terms. For example, the terms of 13, six and seven of our franchise agreements are scheduled to expire in 2005, 2006, and 2007, respectively. As franchise agreements expire, we may apply for a franchise renewal. In connection with renewals, the franchisor may require payment of a renewal fee, increased royalty and other recurring fees and substantial renovation of the facilities, or the franchisor may elect not to renew the franchise. The costs incurred in connection with these agreements are primarily monthly payments due to the franchisors based on a percentage of gross room revenues.

     If we do not comply with the terms of a franchise agreement, following notice and an opportunity to cure, the franchisor has the right to terminate the agreement, which could lead to a default under one or more of our loan agreements, and which could materially and adversely affect us. Prior to terminating a franchise agreement, franchisors are required to notify us of the areas of non-compliance and give us the opportunity to cure the non-

17

compliance. In the past, we have been able to cure most cases of non-compliance and most defaults within the cure periods, and those events of non-compliance and defaults did not cause termination of our franchises or defaults on our loan agreements. If we perform an economic analysis of the hotel and determine that it is not economically feasible to comply with a franchisor’s requirements, we will either select an alternative franchisor or operate the hotel without a franchise affiliation. However, terminating or changing the franchise affiliation of a hotel could require us to incur significant expenses, including liquidated damages, and capital expenditures. Our loan agreements generally prohibit a hotel from operating without a franchise.

     As of May 1, 2005, we have been notified that we were not in compliance with some of the terms of seven of our franchise agreements and have received default and termination notices from franchisors with respect to an additional seven hotels summarized as follows:

a)	Two of these hotels are held for sale;
b)	Seven of the remaining hotels either just completed a major renovation, are undergoing a major renovation or a major renovation is planned. The total cost of the renovations is projected to be $22.3 million of which $10.6 million has been spent;
c)	One of the remaining hotels has a franchise agreement that expires in 2005 and is expected to be renovated upon selection of a new franchise. The total cost of the renovation will not be known until the franchisor inspects the property;
d)	One of the remaining hotels is now in full compliance and is awaiting its cure letter; and
e)	Three of the remaining hotels are currently above the required franchise thresholds. Two of these hotels must remain above those levels until February 2006 to receive a “clean slate” letter, and the other hotel must remain above those levels until July 2005 to receive a “clean slate” letter.

          We cannot be certain that we will be able to complete our action plans, which in aggregate are estimated to cost approximately $8.0 million, of which $1.3 million is reserved with our lenders, to cure the alleged defaults prior to the specified termination dates or any extended time granted to cure any defaults. We believe we are in compliance with our other franchise agreements in all material aspects. While we can give no assurance that the steps taken to date, and planned to be taken the balance of 2005, will return the properties to full compliance, we believe that we will make significant progress and we intend to continue to give franchise agreement compliance a high level of attention. The 14 hotels that are either in default or non-compliance under the respective franchise agreement are part of the collateral security for $337.9 million of mortgage debt at May 1, 2005, due to cross-collateralization provisions.

     In addition, as part of our bankruptcy reorganization proceedings, we entered into stipulations with each of our major franchisors setting forth a timeline for completion of capital expenditures for some of our hotels. However, as of May 1, 2005, we have not completed the required capital expenditures for 18 hotels in accordance with the stipulations and estimate that completing those improvements will cost $9.4 million of which $5.2 million is reserved with our lenders. Under the stipulations, the applicable franchisors could therefore seek to declare certain franchise agreements in default and, in certain circumstances, seek to terminate the franchise agreement. We have scheduled or have begun renovations on 15 of these hotels aggregating $8.3 million of the $9.4 million. In addition, one of these hotels is held for sale and represents $0.3 million of the $9.4 million.

     In March 2005, we entered into letter agreements with IHG for our Holiday Inns in Strongsville, OH, Monroeville, PA and Washington-Meadowlands, PA which extend the deadline for us to complete renovations on these hotels. The letter agreements require us to complete various phases of the renovations by agreed upon milestone dates. The capital expenditures related to these three hotels total $10.7 million, $3.5 million of which is reserved with our lenders. The agreed upon completion date for these three hotels is October 31, 2005, and we are subject to monetary penalties if we do not comply with the agreed upon milestone and completion dates. In addition, IHG may elect to terminate the franchise agreements for these three hotels if the renovations have not been completed, and in the event of a termination, we may be subject to liquidated damages. We anticipate that we will be able to meet these milestone and completion deadlines .

     During 2004, we entered into new franchise agreements for all 15 of our Marriott-branded hotels at that time and agreed to pay a fee aggregating approximately $0.5 million, of which $0.1 million has been paid, and $0.4 million is payable in 2007, subject to offsets. In connection with our agreement, Marriott may review the capital improvements we have made at our Marriott franchised hotels during 2004, and may, in its reasonable business

18

judgment, require us to make additional property improvements and to place amounts into a reserve account for the purpose of funding those property improvements.

          To comply with the requirements of our franchisors, to improve our competitive position in individual markets, and repair hurricane damaged hotels, we plan to spend $88.9 million on our hotels in 2005, which includes committed hurricane repair capital expenditures of approximately $43.7 million, much of which we anticipate will be covered by insurance proceeds. This will substantially complete all of our deferred renovations. We spent $35.2 million on capital expenditures during 2004 on our continuing operations hotels.

Letters of Credit

     As of March 31, 2005, we had one irrevocable letter of credit totaling $3.4 million outstanding, fully collateralized by our cash (classified as restricted cash in the accompanying Condensed Consolidated Balance Sheets), as a guarantee to Zurich American Insurance Company. This letter of credit will expire in November 2005 but may require renewal beyond that date.

Self-insurance

     We are self-insured up to certain limits with respect to employee medical, employee dental, property insurance, general liability insurance, workers’ compensation, auto liability and other forms of insurance. We establish liabilities for these self-insured obligations annually, based on actuarial valuations and our history of claims. Should unanticipated events cause these claims to escalate beyond normal expectations, our financial condition and results of operations would be negatively affected. As of March 31, 2005, and December 31, 2004, we had approximately $11.6 million and $11.4 million accrued for these liabilities, respectively.

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

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

Casualty losses

     During August and September 2004, eight of our hotels were damaged (six extensively) from the hurricanes that made landfall in the Southeastern United States. Two of the hotels (Crowne Plaza West Palm Beach and Holiday Inn Melbourne) remain closed. The Crowne Plaza West Palm Beach and the Holiday Inn Melbourne hotels are expected to reopen in the 2005 third and fourth quarters, respectively. All properties in our portfolio are covered by property casualty and business interruption insurance.

     With regard to physical property damage, we are recognizing repair expenses related to hurricane damage as we incur them. We have also written off the net book value (NBV) of the assets that were destroyed by the hurricane. As the combined repair expenses and NBV write-offs exceed the relevant insurance deductibles, we have recorded a receivable from the insurance carriers. For the three months ended March 31, 2005, we incurred $0.1 million in hurricane repair charges as we determined we will be subject to another $0.1 million in deductible costs. Hurricane costs incurred to date (including costs incurred September 2004 to December 2004) total $1.9 million for hurricane repair costs, $3.7 million written off in NBV of destroyed assets, and we have recorded a $3.2 million receivable due from the insurance company for amounts that exceed the deductibles, which results in a cumulative $2.4 million casualty loss as a result of the hurricanes. In the first quarter 2005, $15.8 million was released from our insurance carrier ($17.8 million in total) as advances for repairs on our Crowne Plaza West Palm Beach, Holiday Inn Melbourne, Holiday Inn Winter Haven, Holiday Inn Express Pensacola and Holiday Inn Pensacola University Mall hotels. All advances are forwarded to our lenders from which we receive reimbursements as we incur hurricane-repair and capital expenditures. For the three months ended March 31, 2005, we received $5.2 million from our lenders for hurricane related reimbursements. Cumulatively, since September 2004

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when the first hurricane losses occurred through March 31, 2005, we have received $6.6 million from our lenders for hurricane-related reimbursements.

     We have filed business interruption claims for both hotels for the September through December 2004 period and for the January 2005 through March 2005 period. Business interruption claims submitted for the 2004 period totaled $2.1 million and for the first three months of 2005 totaled $3.2 million. None of these amounts have been included in our financial statements, because consistent with GAAP, these amounts cannot be recognized until settled or received.

Litigation

     From time to time, as we conduct our business, legal actions and claims are brought against us. The outcome of these matters is uncertain. However, we believe that all currently pending matters will be resolved without a material adverse effect on our results of operations or financial condition. Claims relating to the period before we filed for Chapter 11 protection are limited to the amounts approved by the Bankruptcy Court for settlement of such claims and are payable out of a reserve for allowed claims as recorded on our balance sheet. On July 26, 2004, the Preferred Stock was redeemed and cash of $2.2 million replaced the Preferred Stock shares held in the disputed claims reserve. Accordingly, as of March 31, 2005, a $2.2 million accrual is recorded in other accrued liabilities for these claims. We have reserved for all claims approved by the Bankruptcy Court which have not yet been paid.

8. New Accounting Pronouncements

     On December 16, 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 153, Exchanges of Nonmonetary Assets – An Amendment of APB Opinion No. 29 (“SFAS No. 153”). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have “commercial substance.” SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not believe that the adoption of SFAS No. 153 on June 15, 2005 will have a material effect on the Company’s consolidated financial statements.

9. Related Party Transactions

     Oaktree and Blackstone, representatives of which serve on our board of directors, and/or affiliates received 2,262,661 shares and 1,049,034 shares of common stock that were exchanged as part of the Preferred Share Exchange in June 2004. Approximately $26.3 million and $11.1 million of the net proceeds from the common stock offering were used to redeem the remaining shares of Preferred Stock held by Oaktree and Blackstone, respectively. Including the Preferred Share Exchange shares, Oaktree and Blackstone are currently the beneficial owners of 2,817,577 and 1,326,909 shares of our common stock, respectively.

     Until May 1, 2004, we had a revolving loan agreement with OCM Fund II that allowed us to borrow up to $2 million; however, all of our borrowings under that agreement were repaid in full in December 2003. The interest rate on the loan was 10% per annum, and in 2003 we paid $42,222 in interest to OCM Fund II on our borrowings. This revolving loan agreement was secured by two land parcels and expired on May 1, 2004. OCM Fund II is a greater than 10% stockholder, and Oaktree is the general partner of OCM Fund II. Russel S. Bernard, a principal of Oaktree and Sean F. Armstrong, a managing director of Oaktree, are directors of Lodgian.

10. Subsequent Events

Joint Venture Buyout

     On April 18, 2005, we acquired our joint venture partner’s 40% interest in the Crowne Plaza hotel located in Macon, Georgia. The acquisition price was $0.7 million and was paid in cash at closing. We now have a 100% ownership interest in this property.

Amendment to Merrill Lynch Floating Rate Loan

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     On April 29, 2005, we entered into an amendment with Merrill Lynch to modify certain of the provisions of the Floating Rate Loan. Under the terms of the amendment, Merrill Lynch agreed to allow the release of the Holiday Inn St. Louis, Missouri as collateral under the loan in exchange for payment of $4.8 million for debt pay down. Approximately $2.6 million of the release price was paid through the release of certain reserves held on other properties which were recently sold or are expected to be sold in the near future. We paid the balance of the release price, approximately $2.2 million, from our cash balances. In addition to the release of the St. Louis property from the collateral pool, the amendment provided for the following:

•   Extension of the initial maturity from June 30, 2006 to January 11, 2007. We still maintain the option, subject to certain conditions, to extend the loan for up to three years from the new initial maturity date in January 2007;

•   Once the Holiday Inn Select in Niagara Falls, New York is sold, three additional properties in the floating rate pool will be classified as “sale properties.” Once classified as “sale properties,” these hotels will be able to be released from the collateral pool by payment of the greater of (a) 100% of the aggregate allocated loan amount (lowered from 125%) and (b) the net sales proceeds of the property;

•   The prepayment penalty, which is currently 3% and will drop to 1% in July 2005, has been further reduced for the three additional sale properties after July 2005 to 0.5%;

•   If we sell the Holiday Inn Select in Niagara Falls, New York by June 30, 2005, Merrill Lynch will be required to purchase an interest rate cap agreement with a LIBOR strike price of 6% which would be effective from the initial maturity date of June 30, 2006 to January 11, 2007. We will be required to purchase an interest rate cap agreement should we elect to extend the maturity of the loan past January 2007 with a LIBOR strike price of 6%, which is an increase of 100 basis points from the requirement in the original loan agreement; and

•   Certain required capital and environmental repairs under the original Floating Rate Loan have been determined not to be necessary and have been removed as requirements under the loan.

     Had this amendment been in effect as of March 31, 2005, we would have been in compliance with the debt yield covenant under the Floating Rate Loan.

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

     You should read the discussion below in conjunction with the unaudited condensed consolidated financial statements and accompanying notes, set forth in “Item I. Financial Statements” included in this Form 10-Q. Also, the discussion which follows contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in our Form 10-K for the year ended December 31, 2004.

Executive Overview

     We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel Business in the 2005 Green Book issue published in December 2004. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn,” “Marriott,” and “Hilton.” As of May 1, 2005, we operated 83 hotels with an aggregate of 15,681 rooms, located in 31 states and Canada. Of the 83 hotels, 76 hotels, with an aggregate of 13,718 rooms, are part of our continuing operations, while seven hotels, with an aggregate of 1,963 rooms are held for sale and classified in discontinued operations. Three of the seven hotels with an aggregate 736 rooms were identified for sale in January 2005. Our current portfolio of 83 hotels consists of:

•   78 hotels that we wholly own and operate through subsidiaries;

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•   four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control (see subsequent events for discussion of the buyout of the joint venture partner at one of these hotels); and

•   one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

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

     During 2003, we developed a portfolio improvement strategy which was consistent with our goals of operating a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In accordance with this strategy and our efforts to reduce debt and interest costs, we identified 19 hotels, one office building and three land parcels for sale. In January 2005, we identified three additional hotels as held for sale. Between November 1, 2003 and March 31, 2005, we sold the office building, 15 of the 22 hotels and two of the three land parcels. As of May 1, 2005, our portfolio consisted of 83 hotels, 76 of which represent our continuing operations portfolio (including one hotel in which we have a non-controlling equity interest and which we do not consolidate).

Overview of Continuing Operations

     Below is an overview of our results of operations, which are presented in more detail in “Results of Operations — Continuing Operations:”

•   Revenues decreased primarily due to displacement at the two hotels closed for hurricane renovations, three other hotels damaged by the hurricanes and eight hotels under renovation during the quarter. We saw improvements in ADR and RevPAR as compared to the same period in 2004 with negative growth in occupancy as a result of our on-going renovation program.

•   Operating expenses, including direct hotel and other operating expenses, increased $0.4 million in the first quarter 2005 as compared to the first quarter 2004 primarily as a result of an increase in vacation costs as we revised our process to give us better information to track vacation time for our associates. Corporate overhead expenses increased due to higher costs for professional fees and severance costs. We recorded additional expenses related to the hurricanes as we will be subject to another $0.1 million deductible.

•   Interest expense was lower as we capitalized more interest due to our renovation program and deferred loan cost amortizations were lower due to the loan refinance in June 2004.

•   Net loss attributable to common stock was $7.1 million for the first quarter 2005 compared with $7.1 million for the first quarter 2004.

Overview of Discontinued Operations

     As discussed above, during 2003, we identified 19 hotels, one office building and three land parcels for sale as part of our portfolio improvement strategy and our efforts to reduce debt and interest costs. In January 2005 we identified three additional hotels as held for sale. Between November 1, 2003 and May 1, 2005, we sold fifteen of the nineteen hotels, the office building, and two of the three land parcels. Summarized below is certain financial data related to the fifteen hotels, the office building, and two land parcels sold between November 1, 2003 and May 1, 2005:

	(Unaudited in thousands)
Aggregate sales price	$	66,785
Debt pay down (principal only)	$	51,486

     In accordance with SFAS No. 144, we have included the hotel assets sold during 2004 and 2005 as well as the hotel assets held for sale at March 31, 2005 (including any related impairment charges) in Discontinued Operations

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in the Consolidated Statement of Operations. The assets held for sale at March 31, 2005 and December 31, 2004 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. Where the carrying values of the assets held for sale exceeded the estimated fair values, net of selling costs, we reduced the carrying values and recorded impairment charges. We determine fair values using quoted market prices, when available, or other accepted valuation techniques. During the three months ended March 31, 2005, we recorded impairment charges of $1.9 million on assets held for sale. Where the estimated selling prices, net of selling costs, of assets held for sale exceeded the carrying values, we did not increase the carrying values of the assets. Among other criteria, we classify an asset as held for sale if we expect to dispose of it within one year.

     While we believe that the completion of these dispositions is probable, the sale of these assets is subject to market conditions and we cannot provide assurance that we will finalize the sale of all or any of these assets on favorable terms or at all. We believe that all our held for sale assets as of March 31, 2005 remain properly classified in accordance with SFAS No. 144.

     The results of operations of the other 75 hotels that we consolidate in our financial statements are reported in continuing operations. Our continuing operations reflect the results of operations of those hotels which we plan to retain in our portfolio for the foreseeable future.

Critical Accounting Policies and Estimates

     Our financial statements are prepared in accordance with GAAP. As we prepare our financial statements, we make estimates and assumptions which 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. Actual results could differ from our estimates. A summary of our significant accounting policies is included in Note 1 of the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2004. Also, our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the year ended December 31, 2004, and we believe no changes have occurred.

Income Statement Overview

     The discussion below focuses primarily on our continuing operations. In the continuing operations discussions, we compare the results of operations for the 75 consolidated hotels which we plan to retain in our portfolio for the foreseeable future, for the three months ended March 31, 2005 and March 31, 2004. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Income Statement Overview” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 for a general description of the categorization of our revenues and expenses.

Three Months Ended March 31, 2005 (“First Quarter 2005”) Compared to the Three Months Ended March 31, 2004 (“First Quarter 2004”)

Results of Operations — Continuing Operations

First Quarter 2005 Compared to First Quarter 2004

Revenues – Continuing Operations

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	Three months ended
	March 31, 2005			March 31, 2004			Increase (decrease)
Revenues ($ in thousands):
Rooms	$	54,461		$	56,050		$	(1,589	)	(2.8	)%
Food and beverage		14,901			16,227			(1,326	)	(8.2	)%
Other		2,492			2,701			(209	)	(7.7	)%
Total revenues	$	71,854		$	74,978		$	(3,124	)	(4.2	)%
Occupancy		58.5	%		60.2	%				(2.8	)%
ADR	$	79.73		$	76.56		$	3.17		4.1	%
RevPAR	$	46.68		$	46.06		$	0.62		1.3	%

     First quarter 2005 revenues decreased 4.2% primarily due to the continued closure of two hotels (Crowne Plaza West Palm Beach and Holiday Inn Melbourne), displacement related to renovations at three other hurricane damaged hotels and displacement at eight other hotels undergoing renovation during the quarter. Displacement refers to lost revenue and profit due to rooms out of order resulting from renovation or hurricane repairs. First quarter 2004 room revenues for the Crowne Plaza West Palm Beach and Holiday Inn Melbourne were $3.6 million, food and beverage revenues were $1.0 million and other revenues were $0.1 million, for a total of $4.8 million decrease in revenues year over year. First quarter 2005 total revenue displacement, primarily consisting of room revenue displacement, for the three other hurricane-damaged hotels was $0.1 million. The eight hotels under renovation resulted in $0.8 million of displaced room revenues and $1.1 million in total revenues. Accordingly, for the three months ended March 31, 2005, room revenue displacement for the hurricane-damaged or closed hotels and hotels under renovation was $4.6 million and total revenue displacement was $6.0 million.

     Below is a chart that shows our occupancy, ADR, RevPAR and RevPAR Index (market share) for our continuing operations hotels. To illustrate the impact of the two hotels closed due to hurricane damage, the impact of renovations underway and completed, and the impact of branding, we have adjusted this information into seven different subsets. These subsets indicate that our Marriott and Hilton branded hotels outperform our IHG branded hotels. In addition, these subsets indicate that where we have recently completed a major renovation, we see an increase in RevPAR that is greater then the average increase for all of our continuing operations hotels.

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Hotel	Room			Three Months Ended
Count	Count			March 31, 2005			March 31, 2004			Increase (decrease)
75		13,478	All Continuing Operations
			Occupancy		58.5	%		60.2	%				(2.7	)%
			ADR	$	79.73		$	76.56		$	3.17		4.1	%
			RevPAR	$	46.68		$	46.06		$	0.62		1.3	%
73		12,964	Continuing Operations less two hotels closed due to hurricane damage
			Occupancy		58.5	%		59.3	%				(1.3	)%
			ADR	$	79.74		$	75.32		$	4.42		5.9	%
			RevPAR	$	46.68		$	44.67		$	2.01		4.5	%
			RevPAR index		100.4	%		101.8	%		(1.4	)	(1.4	)%
65		11,148	Continuing Operations less two hotels closed due to hurricane damage and hotels under renovations in the first quarters of 2004 and 2005
			Occupancy		58.0	%		58.1	%				(0.2	)%
			ADR	$	77.59		$	73.58		$	4.02		5.5	%
			RevPAR	$	44.99		$	42.72		$	2.26		5.3	%
			RevPAR index		102.6	%		103.2	%		(0.6	)	(0.6	)%
21		3,013	Hotels completing major renovations in 2003 and 2004
			Occupancy		69.2	%		68.2	%				1.5	%
			ADR	$	89.97		$	83.66		$	6.31		7.5	%
			RevPAR	$	62.24		$	57.04		$	5.20		9.1	%
			RevPAR index		113.9	%		109.8	%		4.1		3.7	%
16		1,845	Marriott Hotels
			Occupancy		67.0	%		65.0	%				3.0	%
			ADR	$	85.80		$	81.09		$	4.71		5.8	%
			RevPAR	$	57.48		$	52.74		$	4.74		9.0	%
			RevPAR index		124.5	%		122.1	%		2.4		2.0	%
4		777	Hilton Hotels
			Occupancy		61.0	%		58.5	%				4.3	%
			ADR	$	94.45		$	88.12		$	6.33		7.2	%
			RevPAR	$	57.63		$	51.57		$	6.07		11.8	%
			RevPAR index		99.5	%		91.8	%		7.7		8.4	%
46		8,956	IHG Hotels less two hotels closed due to hurricane damage
			Occupancy		59.5	%		60.3	%				(1.3	)%
			ADR	$	78.44		$	74.69		$	3.75		5.0	%
			RevPAR	$	46.67		$	45.04		$	1.63		3.6	%
			RevPAR index		99.5	%		101.8	%		(2.3	)	(2.3	)%
7		1,386	Other Brands and Independent Hotels
			Occupancy		39.8	%		45.7	%				(13.1	)%
			ADR	$	66.02		$	60.59		$	5.43		9.0	%
			RevPAR	$	26.25		$	27.72		($	1.47	)	(5.3	)%
			RevPAR index		74.5	%		79.1	%		(4.6	)	(5.8	)%

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Direct operating expenses – Continuing Operations

	Three months ended
	March 31, 2005			March 31, 2004			Increase (decrease)
				($ in thousands)
Direct operating expenses:
Rooms	$	15,494		$	15,457		$	37		0.2	%
Food and beverage		10,982			11,289			(307	)	(2.7	)%
Other		1,930			1,931			(1	)	(0.1	)%
Total direct operating expenses	$	28,406		$	28,677		$	(271	)	(0.9	)%
% of total revenues		39.5	%		38.3	%

     Direct operating expenses were 0.9% lower than in 2004 but as a percentage of revenues increased to 39.5% from 38.2%. Room expenses on a cost per occupied room (POR) basis was $22.68 in the first quarter 2005 as compared to $21.11 in the first quarter 2004. Room payroll and related benefits, on an actual POR basis, were $14.16 in the first quarter 2005 as compared to $13.46 in 2004. Other rooms expenses, on an actual POR basis, were $8.52 in the first quarter 2005 as compared to $7.65 in 2004, partially due to increased costs in linen expense resulting from upgraded linen packages mandated by certain brands. Guest and operating supplies along with guest loyalty expenses also increased. Food and beverage expenses decreased $0.3 million or 2.7% as a result of decreased revenues.

Other operating expenses – Continuing Operations

	Three months ended
	March 31, 2005			March 31, 2004			Increase (decrease)
				($ in thousands)
Other operating expenses:
Other hotel operating costs:
General and administrative	$	5,650		$	5,195		$	455		8.8	%
Advertising and promotion		4,054			3,886			168		4.3	%
Franchise fees		4,933			5,107			(174	)	(3.4	)%
Repairs and maintenance		4,192			4,241			(49	)	(1.2	)%
Utilities		4,976			4,786			190		4.0	%
Other expenses		95			(21	)		116		(552.4	)%
Total other hotel operating costs	$	23,900		$	23,194		$	706		3.0	%
Property and other taxes, insurance and leases	$	5,690		$	5,561		$	129		2.3	%
Corporate and other		4,658			4,335			323		7.5	%
Casualty losses		104			—			104		n/m
Depreciation and amortization		6,658			6,671			(13	)	(0.2	)%
Impairment of long-lived assets		1,655			—			1,655		n/m
Total other operating expenses	$	42,665		$	39,761		$	2,904		7.3	%
% of total revenues		59.4	%		53.0	%

     Other hotel operating costs increased $0.7 million or 3.0% in the first quarter 2005 as compared to the same period in 2004 due to the following:

•   Hotel administration costs increased $0.5 million or 8.8% primarily as a result of an increase in vacation pay accruals; and

•   Utilities increased $0.2 million or 4.0% as a result of the increases in usage and rates.

     Corporate and other costs increased $0.3 million or 7.5% primarily due to severance costs and other professional fees.

     Impairment of long-lived assets charges of $1.7 million represents the $0.1 million write-off of the net book value of assets that were replaced in the first quarter 2005 and a $1.6 million impairment charge on the Holiday Inn Lawrence hotel due to a reduced fair value appraisal on this hotel.

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Non-operating income (expenses) – Continuing Operations

	Three months ended
	March 31, 2005			March 31, 2004				Increase (decrease)
					($ in thousands)
Non-operating income (expenses):
Interest income and other	$	171			$	43		$	128		297.7	%
Interest expense and other financing costs:
Preferred Stock dividend		—				(4,285	)		4,285		(100.0	)%
Interest expense		(6,983	)			(8,024	)		1,041		(13.0	)%
Minority interests		(145	)			147			(292	)	(198.6	)%

     The Preferred Stock dividend relates to the 12.25% dividend on the Preferred Stock issued on November 25, 2002. Preferred Stock dividend expense is zero in the first quarter 2005 as the Preferred Stock was redeemed in its entirety on July 26, 2004.

     Interest expense decreased $1.0 million for the first quarter 2005 as compared to the same period in 2004 because $0.4 million more of interest was capitalized in the first quarter 2005 as compared to the first quarter of 2004. Additionally, loan fee amortization, which is recorded as interest expense, decreased $0.4 million in the first quarter of 2005 as compared to 2004 as a result of the mortgage refinance that was closed in June 2004.

     Minority interests represent the third party owners’ share of the net income or loss of the four joint ventures in which we have a controlling equity interest. The $0.3 million decrease in minority interest adjustment was primarily the result of one of our joint venture hotels being closed for hurricane repair in the first quarter of 2005.

Results of Operations — Discontinued Operations

     During the first quarter 2005, we sold three hotels for a gross sales price of $9.5 million and used the net proceeds for debt pay down of $9.1 million. In 2004, we sold 11 hotels, comprising an aggregate 2,076 rooms, and two land parcels. The aggregate net proceeds from the sales were approximately $40.9 million of which $37.4 million was used to pay down debt and the balance was used for capital expenditures and general corporate purposes. The aggregate gain from the sale of these assets was $9.2 million.

     Impairment was recorded on assets held for sale in the first quarter 2005 and the first quarter 2004.

     The $1.9 million impairment of long-lived assets held for sale recorded in the first quarter 2005 represents the write-down of four hotels and one land parcel held for sale, the net book value of assets held for sale that were replaced in the first quarter 2005 and adjustments to recapture previously recorded impairment on two hotels. The fair values of the assets held for sale are based on the estimated selling prices less estimated costs to sell. We determine the estimated selling prices in conjunction with our real estate brokers. The estimated selling costs are based on our experience with similar asset sales. We record impairment charges and write down respective hotel asset carrying values if their carrying values exceed the estimated selling prices less costs to sell. As a result of these evaluations, during the first quarter of 2005, we recorded impairment losses as follows:

a)	an additional $0.3 million on the Holiday Inn Express Gadsden, AL to reflect the estimated selling costs of this sale as this hotel was identified for sale in January 2005 and to reflect the write-off of capital improvements spent on this hotel for franchisor compliance that did not add incremental value or revenue generating capacity to the property;
b)	an additional $1.0 million on the Holiday Inn Rolling Meadows, IL to reflect the lowered estimated selling price of the hotel;
c)	an additional $0.3 million on the Holiday Inn Morgantown, WV to reflect the reduced selling price and the additional charges to dispose of this hotel in February 2005; and

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d)   an additional $0.4 million on the Mt. Laurel, NJ land parcel to reflect the lowered estimated selling of the land parcel.

     The impairment of long-lived assets held for sale of $2.2 million recorded in first quarter 2004 represents the write-down of five hotels held for sale. As a result of these evaluations, during the first quarter of 2004 we recorded impairment losses as follows:

a)	$0.1 million on the Holiday Inn Express Pensacola, FL to record the loss on sale as this hotel was sold in March 2004;
b)	$0.3 million on the Downtown Plaza Hotel Cincinnati, OH as this hotel was listed for sale in the second quarter 2003. Impairment was recorded to adjust for the further reduction in the estimated selling price of this hotel; and
c)	$1.7 million on the Holiday Inn Rolling Meadows, IL as this hotel was identified for sale in the second quarter 2003. Impairment was recorded to adjust for the further reduction in the estimated selling price of the hotel.

Income taxes

     At December 31, 2004, we had available net operating loss carryforwards of approximately $314 million for federal income tax purposes, including an estimated current year tax loss of $75 million, which will expire in 2005 through 2024. The recently concluded equity offering resulted in an Internal Revenue Code (IRC) Section 382 change, limiting the Company’s ability to utilize these losses. As a result of the application of IRC Section 382, our ability to use these net operating loss carryforwards is subject to an annual limitation of approximately $8.3 million. Due to these and other limitations, a portion or all of the net operating loss carryforwards could expire unused. At December 31, 2004, we established a valuation allowance of $145.2 million to fully offset our net deferred tax asset.

EBITDA

     We use earnings before interest, taxes, depreciation and amortization (“EBITDA”) to measure our performance and to assist us in the assessment of hotel property values. EBITDA is also a widely-used industry measure. However, EBITDA is a non-GAAP measure and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. Depreciation, amortization and impairment are significant non-cash expenses for us as a result of the high proportion of our assets which are long-lived, including property, plant and equipment. We depreciate property, plant and equipment over their estimated useful lives and amortize deferred financing and franchise fees over the term of the applicable agreements. Preferred stock dividends are treated as interest expense and, hence, are added back to loss from continuing operations to derive EBITDA. We also believe that EBITDA provides pertinent information to investors and is an additional indicator of our operating performance.

     The following table presents EBITDA from continuing operations, a non-GAAP measure, for the three months ended March 31, 2005 and March 31, 2004, and provides a reconciliation with the loss from continuing operations, a GAAP measure:

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	Three Months Ended
	March 31, 2005			March 31, 2004
	($ in thousands)
Continuing operations:
Loss from continuing operations	$	(5,951	)	$	(5,949	)
Depreciation and amortization		6,658			6,671
Interest income		(220	)		(48	)
Interest expense		6,983			8,024
Preferred stock dividends		—			4,285
Provision for income taxes — continuing operations		67			76
EBITDA from continuing operations	$	7,537		$	13,059

Loss from continuing operations, and accordingly, EBITDA from continuing operations, is after deducting the following items:

	Three Months Ended
	March 31, 2005		March 31, 2004
	($ in thousands)
Post-emergence Chapter 11 expenses, included in corporate and other on our consolidated statement of operations	$	110	$	195
Impairment loss		1,655		—
Casualty losses - 2004 hurricane damage		104		—

Additional Financial Information Regarding Quarterly Results of Our Continuing Operations

     The following table presents certain quarterly data for our continuing operations for the eight quarters ended March 31, 2005. The data have been derived from our unaudited condensed consolidated financial statements for the periods indicated. Our unaudited consolidated financial statements have been prepared on substantially the same basis as our audited consolidated financial statements and include all adjustments, consisting primarily of normal recurring adjustments we consider to be necessary to present fairly this information when read in conjunction with our consolidated financial statements. The results of operations for certain quarters may vary from the amounts previously reported on our Forms 10-Q filed for prior quarters due to timing of our identification of assets held for sale during the course of the previous eight quarters. The allocation of results of operations between our continuing operations and discontinued operations, at the time of the quarterly filings, was based on the assets held for sale, if any, as of the dates of those filings. This table represents the comparative quarterly operating results for the 75 hotels classified in continuing operations at March 31, 2005:

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							Three Months Ended
	3/31/05			12/31/04			9/30/04			6/30/04			3/31/04			12/31/03			9/30/03			6/30/03
	($ in thousands)
Revenues:
Rooms	$	54,461		$	50,672		$	62,660		$	62,522		$	56,050		$	50,726		$	60,424		$	59,072
Food and beverage		14,901			19,258			16,656			19,167			16,227			18,513			16,092			18,706
Other		2,492			2,294			2,752			2,760			2,701			2,510			2,771			2,783
		71,854			72,224			82,068			84,449			74,978			71,749			79,287			80,561
Operating expenses:
Direct:
Rooms		15,494			15,648			17,895			16,357			15,457			15,441			16,945			16,058
Food and beverage		10,982			13,936			12,328			12,477			11,289			12,307			11,773			12,125
Other		1,930			1,842			2,052			2,038			1,931			2,132			1,968			1,800
		28,406			31,426			32,275			30,872			28,677			29,880			30,686			29,983
		43,448			40,798			49,793			53,577			46,301			41,869			48,601			50,578
Other operating expenses:
Other hotel operating costs		23,900			22,763			24,457			22,916			23,194			21,677			23,206			21,962
Property and other taxes, insurance and leases		5,690			5,037			5,416			5,187			5,561			5,118			5,929			6,713
Corporate and other		4,658			3,451			4,412			4,691			4,335			4,537			4,127			5,980
Casualty gains and losses		104			295			2,019			—			—			—			—			—
Depreciation and amortization		6,658			6,523			6,955			6,797			6,671			6,982			7,308			7,311
Impairment of long-lived assets		1,655			4,878			—			—			—			7,062			2			1,377
Other operating expenses		42,665			42,947			43,259			39,591			39,761			45,376			40,572			43,343
		783			(2,149	)		6,534			13,986			6,540			(3,507	)		8,029			7,235
Other income (expenses):
Interest income and other		171			360			212			66			43			486			114			124
Interest expense and other financing costs:
Preferred stock dividend		—			—			(866	)		(4,233	)		(4,285	)		(4,065	)		(4,027	)		—
Other interest expense		(6,983	)		(7,456	)		(7,264	)		(19,507	)		(8,024	)		(7,583	)		(7,523	)		(6,764	)
Gain on asset dispositions		—			—			—			—			—			444			—			—
Loss on preferred stock redemption		—			—			(4,471	)		(1,592	)		—						—			—
(Loss) income before income taxes, reorganization items and minority interests		(6,029	)		(9,245	)		(5,855	)		(11,280	)		(5,726	)		(14,225	)		(3,407	)		595
Reorganization items																	647						(808	)
Loss before income taxes and minority interest		(6,029	)		(9,245	)		(5,855	)		(11,280	)		(5,726	)		(13,578	)		(3,407	)		(213	)
Minority interests		145			407			503			(71	)		(147	)		1,412			99			(69	)
Loss before income taxes — continuing operations		(5,884	)		(8,838	)		(5,352	)		(11,351	)		(5,873	)		(12,166	)		(3,308	)		(282	)
(Provision) benefit for income taxes - continuing operations		(67	)		259			(337	)		(76	)		(76	)		48			(76	)		(76	)
Loss from continuing operations		(5,951	)		(8,579	)		(5,689	)		(11,427	)		(5,949	)		(12,118	)		(3,384	)		(358	)
Discontinued operations:
(Loss) income from discontinued operations before income taxes		(1,134	)		(5,185	)		1,952			4,180			(1,136	)		(4,388	)		(262	)		(2,083	)
Income tax benefit (provision)
(Loss) income from discontinued operations		(1,134	)		(5,185	)		1,952			4,180			(1,136	)		(4,388	)		(262	)		(2,083	)
Net loss		(7,085	)		(13,764	)		(3,737	)		(7,247	)		(7,085	)		(16,506	)		(3,646	)		(2,441	)
Preferred stock dividend																							(3,818	)
Net loss attributable to common stock	$	(7,085	)	$	(13,764	)	$	(3,737	)	$	(7,247	)	$	(7,085	)	$	(16,506	)	$	(3,646	)	$	(6,259	)

EBITDA Reconciliation of Continuing Operations

     The following table is a reconciliation of the quarterly EBITDA, a non-GAAP measure, for the past 8 quarters for the hotels classified as continuing operations as of March 31, 2005, reflecting the reclassification of certain hotels from continuing operations to discontinued operations as discussed in connection with the preceding table:

	Three Months Ended
	3/31/05			12/31/04			9/30/04			6/30/04			3/31/04			12/31/03			9/30/03			6/30/03
	($ in thousands)
Continuing operations:
Loss from continuing operations	$	(5,951	)	$	(8,579	)	$	(5,689	)	$	(11,427	)	$	(5,949	)	$	(12,118	)	$	(3,384	)	$	(358	)
Depreciation and amortization		6,658			6,523			6,955			6,797			6,671			6,982			7,308			7,311
Fresh start adjustments
Interest income		(220	)		(346	)		(176	)		(80	)		(48	)		(196	)		(72	)		(104	)
Interest expense		6,983			7,456			7,264			19,507			8,024			7,583			7,523			6,764
Preferred stock dividends		—			—			866			4,233			4,285			4,065			4,027			—
Loss on preferred stock redemption		—			—			4,471			1,592			—			—			—			—
Provision (benefit) for income taxes — continuing operations		67			(259	)		337			76			76			(48	)		76			76
EBITDA from continuing operations	$	7,537		$	4,795		$	14,028		$	20,698		$	13,059		$	6,268		$	15,478		$	13,689

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Loss from continuing operations, and accordingly, EBITDA from continuing operations, is after deducting the following items:

	Three Months Ended
	3/31/05		12/31/04			9/30/04		6/30/04		3/31/04		12/31/03			9/30/03		6/30/03
	($ in thousands)
Adjustments to EBITDA:
Post-emergence Chapter 11 expenses, included in corporate and other on consolidated statement of operations	$	110	$	61		$	67	$	135	$	195	$	1,289		$	320	$	1,000
Reorganization expenses													(647	)		—		808
Impairment loss		1,655		4,878			—		—		—		7,062			2		1,377
Gain on asset dispositions		—		—			—		—		—		(444	)		—		—
Casualty losses - 2004 hurricane damage		104		294			2,019		—		—		—			—		—
Adjustments to bankruptcy claims reserves		—		(38	)		—		—		—		(302	)		—		90

  Hotel data by market segment and region

     Hotel data by market segment

     The following two tables present data on occupancy, ADR and RevPAR for hotels in our portfolio (including one hotel that we do not consolidate) for the quarters ended March 31, 2005 and March 31, 2004 , by market segment and the capital expenditures for the three months ended March 31, 2005. The following tables exclude three of our hotels because of year over year comparative issues as noted below:

•   The Springhill Suites by Marriott hotel in Pinehurst, North Carolina (acquired in December 2004) is excluded since we do not have comparative figures for the first quarter 2004;

•   The Holiday Inn Melbourne, Florida hotel since it is currently closed for hurricane renovations; and

•   The Crowne Plaza West Palm Beach, Florida hotel since it is currently closed for hurricane renovations.

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Combined Continuing and Discontinued Operations — 80 hotels

	Capital expenditures
	Three Months Ended
	March 31, 2005		Three Months Ended
	($ in thousands)		March 31, 2005			March 31, 2004
Upper Upscale
Number of properties	$	83		4			4
Number of rooms				825			825
Occupancy				67.0	%		64.0	%
Average daily rate			$	100.25		$	94.24
RevPAR			$	67.17		$	60.31
Upscale
Number of properties		1,648		16			16
Number of rooms				2,783			2,783
Occupancy				65.2	%		66.6	%
Average daily rate			$	92.50		$	86.03
RevPAR			$	60.29		$	57.26
Midscale with Food & Beverage
Number of properties		8,140		48			47
Number of rooms				9,853			9,460
Occupancy				53.2	%		55.2	%
Average daily rate			$	72.78		$	70.02
RevPAR			$	38.69		$	38.64
Midscale without Food & Beverage
Number of properties		1,115		9			7
Number of rooms				1,067			833
Occupancy				60.2	%		53.9	%
Average daily rate			$	64.43		$	62.78
RevPAR			$	38.82		$	33.84
Independent Hotels
Number of properties		2,225		3			6
Number of rooms				535			1,162
Occupancy				29.8	%		41.2	%
Average daily rate			$	59.09		$	58.75
RevPAR			$	17.62		$	24.22
All Hotels
Number of properties		13,211		80			80
Number of rooms				15,063			15,063
Occupancy				55.8	%		56.6	%
Average daily rate			$	77.94		$	73.98
RevPAR			$	43.50		$	41.89

Continuing Operations — 73 hotels

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	Capital expenditures			Three Months Ended
	Three Months Ended			March 31, 2005			March 31, 2004
	March 31, 2005
	($ in thousands)
Upper Upscale
Number of properties	$	83		4			4
Number of rooms				825			825
Occupancy				67.0	%		64.0	%
Average daily rate			$	100.25		$	94.24
RevPAR			$	67.17		$	60.31
Upscale
Number of properties		1,648		16			16
Number of rooms				2,783			2,783
Occupancy				65.2	%		66.6	%
Average daily rate			$	92.50		$	86.03
RevPAR			$	60.29		$	57.26
Midscale with Food & Beverage
Number of properties		8,069		42			41
Number of rooms				8,031			7,638
Occupancy				56.0	%		58.8	%
Average daily rate			$	74.81		$	71.29
RevPAR			$	41.93		$	41.90
Midscale without Food & Beverage
Number of properties		836		8			6
Number of rooms				926			692
Occupancy				65.2	%		58.2	%
Average daily rate			$	65.34		$	64.33
RevPAR			$	42.63		$	37.44
Independent Hotels
Number of properties		2,225		3			6
Number of rooms				535			1,162
Occupancy				29.8	%		41.2	%
Average daily rate			$	59.09		$	58.75
RevPAR			$	17.62		$	24.22
All Hotels
Number of properties		12,861		73			73
Number of rooms				13,100			13,100
Occupancy				58.3	%		59.2	%
Average daily rate			$	79.77		$	75.24
RevPAR			$	46.47		$	44.52

The categories in the tables above are based on the Smith Travel Research Chain Scales and are defined as:

•   Upper Upscale: Hilton and Marriott;

•   Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and Residence Inn by Marriott;

•   Midscale with Food & Beverage: Clarion, DoubleTree, Four Points, Holiday Inn, Holiday Inn Select, Holiday Inn SunSpree Resort and Quality Inn

•   Midscale without Food & Beverage Fairfield Inn by Marriott and Holiday Inn Express

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                 Hotel data by region

          The following two tables present data on occupancy, ADR and RevPAR for hotels in our portfolio (including one hotel that we do not consolidate) for the quarters ended March 31, 2005 and March 31, 2004, by region and the capital expenditures for the three months ended March 31, 2005. The following tables exclude three of our hotels because of year over year comparative issues as noted below:

•   The Springhill Suites by Marriott hotel in Pinehurst, North Carolina (acquired in December 2004) is excluded since we do not have comparative figures for the first quarter 2004;

•   The Holiday Inn Melbourne, Florida hotel since it is currently closed for hurricane renovations; and

•   The Crowne Plaza West Palm Beach, Florida hotel since it is currently closed for hurricane renovations.

Combined Continuing and Discontinued Operations — 80 hotels

	Capital expenditures		Three Months Ended
	Three Months Ended		March 31, 2005			March 31, 2004
	March 31, 2005
	($ in thousands)
Northeast Region
Number of properties	$	4,745		29			29
Number of rooms				5,552			5,552
Occupancy				54.4	%		57.3	%
Average daily rate			$	84.45		$	80.10
RevPAR			$	45.97		$	45.86
Southeast Region
Number of properties		6,379		26			26
Number of rooms				4,297			4,297
Occupancy				55.1	%		55.1	%
Average daily rate			$	67.32		$	63.00
RevPAR			$	37.08		$	34.70
Midwest Region
Number of properties		530		18			18
Number of rooms				3,895			3,895
Occupancy				51.4	%		51.5	%
Average daily rate			$	72.45		$	70.57
RevPAR			$	37.22		$	36.32
West Region
Number of properties		1,557		7			7
Number of rooms				1,319			1,319
Occupancy				77.1	%		74.2	%
Average daily rate			$	94.15		$	87.64
RevPAR			$	72.57		$	65.03
All Hotels
Number of properties		13,211		80			80
Number of rooms				15,063			15,063
Occupancy				55.8	%		56.6	%
Average daily rate			$	77.94		$	73.98
RevPAR			$	43.50		$	41.89

Continuing Operations — 73 hotels

34

	Capital expenditures		Three Months Ended
	Three Months Ended		March 31, 2005			March 31, 2004
	March 31, 2005
	($ in thousands)
Northeast Region
Number of properties	$	4,738		28			28
Number of rooms				5,155			5,155
Occupancy				56.3	%		58.9	%
Average daily rate			$	84.98		$	80.60
RevPAR			$	47.88		$	47.45
Southeast Region
Number of properties		6,061		23			23
Number of rooms				3,753			3,753
Occupancy				56.8	%		57.1	%
Average daily rate			$	68.54		$	63.64
RevPAR			$	38.94		$	36.31
Midwest Region
Number of properties		505		15			15
Number of rooms				2,873			2,873
Occupancy				54.9	%		55.6	%
Average daily rate			$	76.13		$	72.98
RevPAR			$	41.82		$	40.56
West Region
Number of properties		1,557		7			7
Number of rooms				1,319			1,319
Occupancy				77.1	%		74.2	%
Average daily rate			$	94.15		$	87.64
RevPAR			$	72.57		$	65.03
All Hotels
Number of properties		12,861		73			73
Number of rooms				13,100			13,100
Occupancy				58.3	%		59.2	%
Average daily rate			$	79.77		$	75.24
RevPAR			$	46.47		$	44.52

     The regions in the tables above are defined as:

•   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; and

•   West: Arizona, California, Colorado, New Mexico.

Liquidity and Capital Resources

Working Capital

     We use our cash flows primarily for operating expenses, debt service, and capital expenditures. Currently, our principal sources of liquidity consist of cash flows from operations and existing cash balances. Cash flows from operations may be adversely affected by factors such as a reduction in demand for lodging or certain large scale renovations being performed at our hotels. To the extent that significant amounts of our accounts receivable are due

35

from airline companies, a further downturn in the airline industry also could materially and adversely affect the collectibility of our accounts receivable, and hence our liquidity. A further downturn in the airline industry could also affect revenues by decreasing the aggregate levels of demand for our hotels by airline industry employees. At March 31, 2005, airline receivables represented approximately 14.0% of our accounts receivable net of allowances.

     Between November 1, 2003 and May 1, 2005, we sold fifteen hotels, one office building, and two land parcels and have another seven hotels and one land parcel classified as assets held for sale. The aggregate sales price from the sale of the fifteen hotels, the office building and two land parcels sold between November 1, 2003 and May 1, 2005, was $66.8 million, $51.5 million of which was used to pay down debt and $11.0 million of which was used for general corporate purposes, including capital expenditures.

     Our ability to make scheduled debt service payments and fund operations and capital expenditures depends on our future performance and financial results, including the successful implementation of our business strategy and, to a certain extent, the general condition of the lodging industry and the general economic, political, financial, competitive, legislative and regulatory environment. In addition, our ability to refinance our indebtedness depends to a certain extent on these factors as well. Many factors affecting our future performance and financial results, including the severity and duration of macro-economic downturns, are beyond our control. See “Matters Which May Affect Future Results — Risks Related to Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2004.

     In June 2004, we completed an offering to the public of our common stock, the purpose of which was to redeem our outstanding Preferred Stock, to fund capital expenditures related to renovations and repositionings of selected hotels, and for general corporate purposes including funding our growth strategy. In connection with this offering, we closed on the $370 million Merrill Lynch Mortgage Lending, Inc. refinance in order to extend maturities and to convert a substantial portion of floating rate debt to fixed rate debt.

     We intend to continue to use our cash flow to make scheduled debt service payments and fund operations and capital expenditures and, therefore, do not anticipate paying dividends on our common stock in the foreseeable future.

     Although we have emerged from Chapter 11, the distribution of shares to general unsecured creditors is not complete as we continue to reconcile the claims made by these creditors. We have established an accrual for allowed claims from which these claims will be paid. Until this process is complete, we will continue to incur expenses in respect of these claims as well as Bankruptcy Court fees and professional fees.

     In accordance with GAAP, all assets held for sale, including assets that would normally be classified as long-term assets in the normal course of business, were reported as “assets held for sale” in current assets. Similarly, all liabilities related to assets held for sale were reported as “liabilities related to assets held for sale” in current liabilities, including debt that would otherwise be classified as long-term liabilities in the ordinary course of business.

     At March 31, 2005, we had a working capital deficit (current assets less current liabilities) of $13.2 million compared to a working capital surplus of $9.5 million at December 31, 2004. The decrease in working capital was primarily due to a decrease in current assets as we used cash for our renovation program and an increase in current liabilities related to insurance advances received from our insurance carrier for property damage claims. In 2004 with the completion of our common stock offering, we received net proceeds that approximated $175.9 million, of which approximately $25.7 million was used to fund reserve accounts with Merrill Lynch Mortgage pursuant to requirements in our June 2004 Refinancing Debt agreements. A reserve of $22.7 million was funded for capital expenditures and a reserve of $3.0 million was funded for requirements related to a hotel ground lease that was ultimately resolved at approximately $1.8 million. On July 26, 2004, we used approximately $114.0 million of the proceeds from our equity offering to redeem all of our outstanding shares of Series A Preferred Stock, including accrued dividends and a 4% prepayment premium. Approximately $2.2 million in cash replaced the 79,278 shares of Preferred Stock held in the disputed claims reserve.

     During the first quarter 2005 we spent approximately $19.6 million on capital expenditures. We expect to spend an additional $69.3 million during the remainder of 2005, which includes committed hurricane repair capital

36

expenditures of $43.7 million, much of which we anticipate will be covered by insurance proceeds, thereby completing substantially all of our deferred renovations.

     We believe that the combination of our current cash, cash flows from operations, capital expenditure escrows and the proceeds of asset sales will be sufficient to meet our liquidity needs for the next 24 months.

     Our ability to meet our long-term cash needs is dependent on the continuation and extent of the recovery of the economy and the lodging industry, improvement in our operating results, the successful implementation of our portfolio improvement strategy and our ability to obtain third party sources of capital on favorable terms as and when needed. In the short term, we continue to diligently monitor our costs. Our future liquidity needs and sources of working capital are subject to uncertainty and we can provide no assurance that we will have sufficient liquidity to be able to meet our operating expenses, debt service requirements, including scheduled maturities, and planned capital expenditures. We could lose the right to operate certain hotels under nationally recognized brand names, and furthermore, the termination of one or more franchise agreements could lead to defaults and acceleration under one or more loan agreements as well as obligations to pay liquidated damages under the franchise agreements. See “Matters Which May Affect Future Results — Risks Related to Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2004, for further discussion of conditions that could adversely affect our estimates of future liquidity needs and sources of working capital.

Cash Flow

Operating Activities

     Net cash used by operating activities was $0.3 million in the first quarter 2005 as compared to net cash provided by operating activities of $6.1 million in the first quarter of 2004. The decrease in cash generated by operations is attributable to the continued closure of two hotels due to hurricane damage and to fewer hotels in our portfolio due to the sale of hotels.

Investing Activities

     Investing activities provided a net cash inflow of $0.5 million for the three months ended March 31, 2005 and a net cash inflow of $11.1 million for the first three months of 2004. The $10.7 million decrease in the net cash used in investing activities in the three months ended March 31, 2005 as compared to the first three months of 2004 is a result of a $14.6 million increase in capital improvements related to our hurricane damaged hotels and hotel renovation program, a $5.0 million decrease in net proceeds from asset sales, $4.7 million of deposits into capital expenditure reserves in the first three months of 2005 as compared to $2.2 million in withdrawals in 2004, and the receipt of $15.8 million in insurance advance proceeds for the hurricane damaged hotels in the first quarter 2005.

Financing activities

     We used $14.8 million of net cash in financing activities in the three months ended March 31, 2005 for principal payments on our indebtedness and payments of deferred financing costs as compared to $15.5 million used for these purposes in the first three months of 2004.

Debt and Contractual Obligations

     See discussion of our Debt and Contractual Obligations in our Form 10-K for the year ended December 31, 2004 and Note 10 in this 10-Q filing.

Off Balance Sheet Arrangements

     We have no off balance sheet arrangements.

37

Market Risk

     We are exposed to interest rate risks on our variable rate debt. At March 31, 2005 and December 31, 2004, we had outstanding variable rate debt of approximately $93.2 million and $102.7 million, respectively.

     On May 22, 2003, we finalized the $80 million Lehman Financing which was repaid on June 25, 2004. The Lehman Financing was a two-year term loan with an optional one-year extension and bore interest at the higher of 7.25% or LIBOR plus 5.25%. In order to manage our exposure to fluctuations in interest rates with the Lehman Financing, we entered into an interest rate cap agreement, which allowed us to obtain this financing at a partial floating rate and effectively capped the interest rate at LIBOR of 5.00% plus 5.25%. When LIBOR exceeded 5.00%, the contracts would have required settlement of net interest receivable at specified intervals, which generally coincided with the dates on which interest was payable on the underlying debt. If LIBOR would have fallen below 5.00%, there would have been no settlement from the interest rate cap. We were exposed to interest rate risks on the Lehman Financing for LIBOR of between 2.00% and 5.00%. The notional principal amount of the interest rate cap outstanding was $80.0 million at March 31, 2005.

     On June 25, 2004, we refinanced both the Merrill Lynch Exit Financing and Lehman Financing. The new refinancing is organized in four fixed rate pools and one floating rate pool. In order to manage our exposure to fluctuations in interest rates with the floating pool, we entered into an interest rate cap agreement, which allowed us to obtain this financing at a floating rate and effectively cap the interest rate at LIBOR of 5.00% plus 3.40%. When LIBOR exceeds 5.00%, the contract requires settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 5.00%, there is no settlement from the interest rate cap. We are exposed to interest rate risks on the floating pool for increases in LIBOR up to 5.00%, but we are not exposed to increases in LIBOR above 5.00% because settlements from the interest rate caps would offset the incremental interest expense. The notional principal amount of the interest rate cap outstanding was $110.0 million at March 31, 2005.

     The fair value of the interest rate cap related to Refinanced Debt as of March 31, 2005 was approximately $42,000. The fair value of the one cap related to the Lehman Financing as of March 31, 2005 and December 31, 2004 were nil. The fair values of the interest rate caps were recognized on the balance sheet in other assets. Adjustments to the carrying values of the interest rate caps are reflected in interest expense.

     As a result of having two interest rate caps, we believe that our interest rate risk at March 31, 2005 and December 31, 2004 is minimal. The impact on annual results of operations of a hypothetical one-point interest rate reduction on the interest rate caps as of March 31, 2005 would be a reduction in net income of approximately $40,000. These derivative financial instruments are viewed as risk management tools. We do not use derivative financial instruments for trading or speculative purposes. However, we have not elected the hedging requirements of SFAS No. 133.

     At March 31, 2005, approximately $93.2 million of debt instruments outstanding were subject to changes in the LIBOR. Without regard to additional borrowings under those instruments or scheduled amortization, the annualized effect of each twenty-five basis point increase in LIBOR would be a reduction in income before income taxes of approximately $0.2 million. The fair value of the fixed rate mortgage debt (book value $333.1 million) at March 31, 2005 is estimated at $342.5 million.

     The nature of our fixed rate obligations does not expose us to fluctuations in interest payments. The impact on the fair value of our fixed rate obligations of a hypothetical one-point interest rate increase on the outstanding fixed-rate debt as of March 31, 2005 and December 31, 2004 would be approximately $8.1 million and $12.1 million, respectively.

Forward-looking Statements

     We make forward looking statements in this report and other reports we file with the SEC. In addition, management may make oral forward-looking statements in discussions with analysts, the media, investors and others. These statements include statements relating to our plans, strategies, objectives, expectations, intentions and

38

adequacy of resources, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believes,” “anticipates,” “expects,” “intends,” “plans,” “estimates,” and “projects” and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and the impact of these events on our business, financial condition, results of operations and prospects are subject to many risks and uncertainties including the following:

•   The effects of regional, national and international economic conditions, including the magnitude and duration of the economic recovery in the United States;

•   Competitive conditions in the lodging industry and increases in room capacity;

•   The effects of actual and threatened terrorist attacks and international conflicts and their impact on domestic and international travel, including the potentially marked decrease in travel in connection with military action in Iraq or elsewhere;

•   The effectiveness of changes in management and our ability to retain qualified individuals to serve in senior management positions;

•   Requirements of franchise agreements, including the right of some franchisors to immediately terminate their respective agreements if we breach certain provisions;

•   Our ability to complete planned hotel and land parcel dispositions;

•   Seasonality of the hotel business;

•   The financial condition of the airline industry and its impact on air travel;

•   The effects of unpredictable weather such as hurricanes;

•   The effect that Internet reservation channels may have on the rates that we are able to charge for hotel rooms;

•   Increases in the cost of debt and our continued compliance with the terms of our loan agreements;

•   The effect of the majority of our assets being encumbered on our borrowings and future growth;

•   Our ability to meet the continuing listing requirements of the Securities and Exchange Commission and the American Stock Exchange;

•   The effect of self-insured claims in excess of our reserves, or our ability to obtain adequate property and liability insurance to protect against losses, or to obtain insurance at reasonable rates;

•   Potential litigation and/or governmental inquiries and investigations;

•   Laws and regulations applicable to our business, including federal, state or local hotel, resort, restaurant or land use regulations, employment, labor or disability laws and regulations;

•   The short time that the public market for our new securities has existed;

•   The risks identified under “Risks Related to Our Business” and “Risks Relating to Our Common Stock” in our Annual Report on Form 10-K for the year ended December 31, 2003; and

•   Our ability to collect insurance proceeds for both property damage and business interruption claims related to damage caused by hurricanes to certain hotels.

     Any of these risks and uncertainties could cause actual results to differ materially from historical results or those anticipated. Although we believe the expectations reflected in our forward-looking statements are based upon

39

reasonable assumptions, we can give no assurance that our expectations will be attained and caution you not to place undue reliance on such statements. We undertake no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances or their impact on our business, financial condition, results of operations and prospects. Many of these factors are not within our control and we caution you not to put undue reliance on forward looking statements.

Inflation

     We have not determined the precise impact of inflation. However, we believe that the rate of inflation has not had a material effect on our revenues or expenses in recent years. It is difficult to predict whether inflation will have a material effect on our results in the long-term.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk.”

Item 4. Controls and Procedures

     a) Based on an evaluation of our disclosure controls and procedures carried out as of March 31, 2005, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective since they would cause material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 to be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

     b) During the quarter ended March 31, 2005, there were no changes in our internal control over financial reporting which materially affected, or are likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     From time to time, as we conduct our business, legal actions and claims are brought against us. The outcome of these matters is uncertain. However, we believe that all currently pending matters will be resolved without a material adverse effect on our results of operations or financial condition. Claims relating to the period before we filed for Chapter 11 protection are limited to the amounts approved by the Bankruptcy Court for settlement of such claims and are payable out of the reserve for allowed claims established on our balance sheet, which as of March 31, 2005 has a balance of $2.2 million. We have reserved for all claims approved by the Bankruptcy Court which have not yet been paid.

Item 6. Exhibits

     (a) 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.

40

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LODGIAN, INC.
	By:      /s/ W. THOMAS PARRINGTON
Date: May 10, 2005	W. Thomas Parrington
	President and Chief Executive Officer
	By:      /s/ LINDA BORCHERT PHILP
Date: May 10, 2005	Linda Borchert Philp
	Executive Vice President and
	Chief Financial Officer

41

EXHIBIT INDEX

Exhibit
Number	Description
1.1	Disclosure Statement for Joint Plan of Reorganization of Lodgian, Inc., et al (other than the CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.6 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.2	First Amended Joint Plan of Reorganization of Lodgian, Inc., et al (Other than CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.3	Order Confirming First Amended Joint Plan of Reorganization of Lodgian, Inc., et al issued on November 5, 2002 by the United States Bankruptcy Curt for the Southern District of New York (Incorporated by reference to Exhibit 10.8 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.4	Disclosure Statement 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 (Incorporated by reference to Exhibit 10.13.1 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.5	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 (Incorporated by reference to Exhibit 10.13.2 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.6	Order Confirming 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 (Incorporated by reference to Exhibit 10.13.3 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.7	Post Confirmation Order and Notice for Joint Plan of Reorganization of Impac Hotels III, L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.4 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
3.1	Amended and Restated Certificate of Incorporation of Lodgian, Inc. (Incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-113410), filed on June 6, 2004).
3.2	Amended and Restated Bylaws of Lodgian, Inc. (Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
4.1	Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-113410), filed on June 6, 2004).
4.2	Class A Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia Bank, N.A. (Incorporated by reference to Exhibit 10.9 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
4.3	Class B Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia Bank, N.A. (Incorporated by reference to Exhibit 10.10 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).

Exhibit
Number	Description
4.4	Registration Rights Agreement, dated as of November 25, 2002, between Lodgian, Inc. and the other signatories thereto (Incorporated by reference to Exhibit 10.11 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
4.5	Preferred Share Exchange Agreement, dated June 22, 2004, by and among Lodgian, Inc. and the record and/or beneficial stockholders as signatories thereto. (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
4.6	Registration Rights Agreement, dated June, dated June 22, 2004, by and among Lodgian, Inc. and the signatories thereto. (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.1	Loan Agreement, dated as of January 31, 1995, by and among Column Financial, Inc., Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and Moon Airport Hotel, Inc. (Incorporated by reference to Exhibit 10.1.1 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.2	Promissory Note, in original amount of $60.5 million, dated as of January 31, 1995, by Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and Moon Airport Hotel, Inc., in favor of Column Financial, Inc. (Incorporated by reference to Exhibit 10.1.2 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.3	Lease Agreement, dated April 7, 1997, by and between CSB-Georgia Limited Partnership and Impac Hotel Group, L.L.C. (Incorporated by reference to Exhibit 10.14.1 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.4	First Amendment to Lease Agreement, dated as of May 8, 1998, by and between Cousins LORET Venture, L.L.C. and Impac Hotel Group, L.L.C. (Incorporated by reference to Exhibit 10.14.2 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.5	Second Amendment to Lease Agreement, dated as of June 7, 2000, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.3 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.6	Third Amendment to Lease Agreement, dated as of April 1, 2002, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.4 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.7	Fourth Amendment to Lease Agreement, dated as of April 28, 2003, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.5 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.8	Fifth Amendment to Lease Agreement, dated as of December 23, 2003, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.6 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.9	Loan and Security Agreement (Floating Rate), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.1.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.10	Promissory Note A in the original amount of $72,000,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.1.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).

-2-

Exhibit
Number	Description
10.11	Promissory Note B in the original amount of $38,000,000, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.1.3 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.12	Loan and Security Agreement (Fixed Rate #1), dated as of June 25, 2004, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.2.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.13	Promissory Note in the original amount of $63,801,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.2.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.14	Loan and Security Agreement (Fixed Rate #2), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.3.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.15	Promissory Note in the original amount of $67,864,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.3.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.16	Loan and Security Agreement (Fixed Rate #3), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.4.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.17	Promissory Note in the original amount of $66,818,500.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.4.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.18	Loan and Security Agreement (Fixed Rate #4), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.5.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.19	Promissory Note in the original amount of $61,516,500.00, dated as of June 25, 2004, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.5.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.20	Employment Agreement with W. Thomas Parrington, dated December 18, 2003 (Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.21	Restricted Unit Award Agreement with W. Thomas Parrington, dated as of July 15, 2003 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.22	Restricted Unit Award Agreement with W. Thomas Parrington, dated as of April 9, 2004 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.23	Letter Agreement, dated January 21, 2005, between Thomas W. Parrington and Lodgian, Inc. related to Mr. Parrington’s waiver of his 2004 Annual performance bonus. (Incorporated by reference to Exhibit 10.26 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).

-3-

Exhibit
Number	Description
10.24	Employment Agreement between Lodgian, Inc. and Daniel E. Ellis, dated May 2, 2004 (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.25	Employment Agreement between Lodgian, Inc. and Manuel E. Artime, dated May 10, 2004 (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.26	Release Agreement, dated January 31, 2004, between Manuel E. Artime and Lodgian, Inc. (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.27	Employment Agreement between Lodgian, Inc. and Michael W. Amaral, dated May 4, 2004 (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.28	Employment Agreement between Lodgian, Inc. and Samuel J. Davis, dated May 14, 2004 (Incorporated by reference to Exhibit 10.19 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (Registration Number 333-113410), filed with the Commission on June 4, 2004.).
10.29	Executive Employment Agreement between Lodgian, Inc. and Linda B. Philp, dated February 7, 2005. (Incorporated by reference to Exhibit 10.32 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.30	Stock Option Award Agreement, dated January 31, 2005, between Linda B. Philp and Lodgian, Inc. (Incorporated by reference to Exhibit 10.33 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.31	Incentive Stock Option Award Agreement, dated January 31, 2005, between Linda B. Philp and Lodgian, Inc. (Incorporated by reference to Exhibit 10.34 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.32	Incentive Stock Option Award Agreement, dated February 28, 2005, between Daniel G. Owens and Lodgian, Inc. (Incorporated by reference to Exhibit 10.35 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.33	2002 Amended and Restated Stock Incentive Plan of Lodgian, Inc. (Incorporated by reference to Exhibit 10.5 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-1113410), filed on June 6, 2004).
10.34	First Amendment to the Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc. dated April 28, 2005.
10.35	Form of Stock Option Award Agreement. (Incorporated by reference to Exhibit 10.37 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.36	Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective September 1, 2003 (Incorporated by reference to Exhibit 20.1.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-113410), filed on June 6, 2004).
10.37	Amendment No. 1 to the Lodgian, Inc. 401(k) Plan (As Amended and Restated Effective September 1, 2003) (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.38	Amendment No. 2 to the Lodgian, Inc. 401(K) Plan dated March 24, 2005 (As Amended and Restated Effective as of September 1, 2003).**
10.39	Amendment No. 3 to the Lodgian, Inc. 401(K) Plan dated April 28, 2005 (As Amended and Restated Effective as of September 1, 2003).**
10.40	Loan Modification Agreement (Floating Rate) between Merrill Lynch Mortgage Lending, Inc. and the Borrowers identified on the signature pages thereto dated April 29, 2005.**

-4-

Exhibit
Number	Description
31.1	Sarbanes-Oxley Section 302 Certification by the CEO**
31.2	Sarbanes-Oxley Section 302 Certification by the CFO**
32	Sarbanes-Oxley Section 906 Certification by the CEO and CFO.**

** Filed herewith.

-5-

EX-10.38

                                                                   Exhibit 10.38

                                 AMENDMENT NO. 2
                                     TO THE
                            LODGIAN, INC. 401(K) PLAN
           (AS AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 1, 2003)


      Pursuant to the power to amend reserved in Section 12.1 of the Plan in
order to comply with law, Lodgian, Inc. (the "Plan Sponsor") hereby amends the
Plan, effective as of the dates herein indicated as follows:

                                       1.

      Section 8.1(b)(2) is hereby amended effective as of March 28, 2005 by
adding the following at the end of the present provision:

      "Effective as of March 28, 2005, the maximum value of the Vested Benefit
      for automatic cash out purposes shall be reduced from $5,000 to $999."

                                       2.

      Section 8.2(a) is hereby amended effective as of March 28, 2005 by adding
the following to the end of the present provision:

      "Notwithstanding the foregoing, effective as of March 28, 2005, "$1,000"
      shall be substituted for "$5,000" in (1) and (2) above, so that automatic
      cash outs shall only be made if the Vested Benefit is less than $1,000."

                                       3.

      Except as herein amended, the provisions of the Plan shall remain in full
force and effect.

      IN WITNESS WHEREOF, the Plan Sponsor, on behalf of itself and the
Participating Employers has caused this Amendment No. 2 to be executed by its
duly authorized officer, as of the 24 day of March, 2005.


                               LODGIAN, INC.

                               By: s/ Daniel E. Ellis
                               Title:  Senior Vice President & General Counsel

                                       1

EX-10.39

                                                                  Exhibit 10.39

                                 AMENDMENT NO. 3
                                     TO THE
                            LODGIAN, INC. 401(K) PLAN
           (AS AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 1, 2003)


      Pursuant to the power to amend reserved in Section 12.1 of the Plan, and
as authorized by the Board of Directors of Lodgian, Inc., Lodgian, Inc. (the
"Plan Sponsor") hereby amends the Plan, effective as of the dates herein
indicated as follows:

                                       1.

      Effective as of the execution date of this Amendment No. 3, Section 2.3 is
hereby amended by deleting the last sentence of the present provision and
substituting the following:

      "Each other former Employee who is reemployed shall be treated as a new
      Employee for participation and vesting purposes upon reemployment."

                                       2.

      Appendix B to the Plan is hereby amended effective as of September 1, 2003
by the addition of the following to provide for credit for service with an
employer acquired by Lodgian or an Affiliate:

      o  "Any employer, all the assets or shares of stock of which are
         acquired by Lodgian, Inc. or an Affiliate thereof."

      Except as herein amended, the provisions of the Plan shall remain in full
force and effect.

      IN WITNESS WHEREOF, the Plan Sponsor, on behalf of itself and the
Participating Employers has caused this Amendment No. 3 to be executed by its
duly authorized officer, as of the 28 day of April, 2005.

                                LODGIAN, INC.

                                By: s/ Daniel E. Ellis

                                Title:  Senior Vice President & General Counsel

                                      1

EX-10.40

                                                                  EXHIBIT 10.40

                   LOAN MODIFICATION AGREEMENT (FLOATING RATE)

     THIS LOAN MODIFICATION AGREEMENT (FLOATING RATE), dated as of April 29,
2005 (this "MODIFICATION AGREEMENT"), between the parties identified as
"Borrowers" on the signature pages hereto (each a "BORROWER" and collectively,
"BORROWERS") and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER").

                                    RECITALS:

     WHEREAS, pursuant to the terms and conditions of that certain Loan and
Security Agreement (Floating Rate), dated as of June 25, 2004 (as amended or
modified from time to time, the "LOAN AGREEMENT"; all capitalized terms used but
not defined herein shall have the meanings ascribed thereto in the Loan
Agreement), Lender made a loan to Borrowers and certain other Affiliates of
Borrowers in the original principal amount of $109,999,900 (the "LOAN"); and

     WHEREAS, Borrowers and Lender wish to: (a) provide for the Release of the
Property located in St. Louis, Missouri (the "ST. LOUIS PROPERTY") and the
prepayment of a portion of the Loan in connection therewith; (b) add new defined
terms of "Additional Sale Property" and "Additional Sale Properties" under the
Loan Agreement; (c) amend and modify the definitions of "Interest Accrual
Period", "Minimum Debt Yield", "Net Sales Proceeds", "Payment Date" and "Release
Price" under the Loan Agreement; (d) extend the Scheduled Maturity Date of the
Loan for a period of six (6) months and eleven (11) days; (e) modify the
Scheduled Mortgage Principal Payments; and (f) otherwise amend and modify the
Loan Agreement and the other Loan Documents upon the terms and conditions set
forth herein.

     NOW, THEREFORE, in consideration for the Loan, the covenants, agreements,
representation and warranties contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree to modify and amend the Loan Agreement and other Loan
Documents as follows:

     1. The Loan Agreement and Loan Documents are hereby modified and amended
as follows:

     (a) A new definition for "Additional Sale Property" and "Additional Sale
Properties" is hereby added to Section 1.1 of the Loan Agreement as follows:

     "ADDITIONAL SALE PROPERTY" and "ADDITIONAL SALE PROPERTIES" means
     individually or collectively, the Properties identified in EXHIBIT A as
     "Additional Sale Properties", but only from and after the date of the sale
     of the Holiday Inn Select, Niagara Falls, New York Sale Property and the
     Release of such Sale Property from the Lien of the applicable Mortgage in
     accordance with the provisions of this Agreement.

     (b) The term "Interest Accrual Period" as defined in Section 1.1 of the
Loan Agreement is hereby deleted in its entirety and superseded by the
following:



     "INTEREST ACCRUAL PERIOD" means with respect to the calculation of
     interest accrued (and to accrue) with respect to any Payment Date, a
     period commencing on the fifteenth (15th) day of the prior calendar month
     and ending on the fourteenth (14th) day of the calendar month in which such
     Payment Date occurs.

     (c) The term "Minimum Debt Yield" as defined in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and superseded by the following:

     "MINIMUM DEBT YIELD" means (i) prior to the first (1st) day of the first
     (1st) full month after the first (1st) anniversary of the Closing Date,
     9%, (ii) from and after the first (1st) day of the first (1st) full month
     after the first (1st) anniversary of the Closing Date and through and
     including the Scheduled Maturity Date, or, if the Loan is extended for the
     First Extension Term, through and including the last day of the month in
     which the Scheduled Maturity Date would have occurred but for such
     extension, 10%, (iii) if the Loan is extended for the First Extension
     Term, from and after the first (1st) day of the first (1st) full month of
     the First Extension Term and through and including the last day of the
     First Extension Term, or, if the Loan is further extended for the Second
     Extension Term, through and including the last day of the month in which
     the last day of the First Extension Term occurs, 11%, (iv) if the Loan is
     extended for the Second Extension Term, from and after the first (1st) day
     of the first (1st) full month of the Second Extension Term and through and
     including the last day of the Second Extension Term, or, if the Loan is
     further extended for the Third Extension Term, through and including the
     last day of the month in which the last day of the Second Extension Term
     occurs, 12%, and (v) if the Loan is extended for the Third Extension Term,
     from and after the first (1st) day of the first (1st) full month of the
     Third Extension Term and through and including the last day of the Third
     Extension Term, 13%.

     (d) The term "Net Sales Proceeds" as defined in Section 1.1 of the Loan
Agreement is hereby modified by adding: "or an Additional Sale Property"
immediately after "a Sale Property" in the second (2nd) line thereof, and by
adding: "or Additional Sale Property" immediately after "applicable Sale
Property" in the last line thereof.

     (e) The term "Payment Date" as defined in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and superseded by the following:

     "PAYMENT DATE" means the eleventh (11th) day of each calendar month during
     the term of the Loan, or if such eleventh (11th) day is not a Business
     Day, then the immediately preceding Business Day.

     (f) The term "Release Price" as defined in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and superseded by the following:

                                       2


     "RELEASE PRICE" means an amount equal to (x) with respect to a Sale
     Property or an Additional Sale Property, the greater of (i) one hundred
     percent (100%) of the Aggregate Allocated Loan Amount of the applicable
     Sale Property or Additional Sale Property, and (ii) one hundred percent
     (100%) of the Net Sales Proceeds with respect to the applicable Sale
     Property or Additional Sale Property; and (y) with respect to any Property
     that is not a Sale Property or an Additional Sale Property, one hundred
     twenty-five percent (125%) of the Aggregate Allocated Loan Amount of the
     applicable Property.

     (g) The term of the Loan is hereby extended for a period of six (6) months
and eleven (11) days and the term "Scheduled Maturity Date" as defined in
Section 1.1 of the Loan Agreement is hereby modified by deleting the words
"June 2006" and substituting the words "January 2007" therefor.

     (h) Section 2.3(A) of the Loan Agreement is hereby amended by adding the
following language at the end of said provision:

     "Notwithstanding the foregoing, the Borrowers shall not be required to
     maintain the Cap in effect during the period from July 1, 2006 to the
     Scheduled Maturity Date (the "INTERIM EXTENSION PERIOD") unless Lender,
     in its sole discretion, elects to pay for the cost of extending the Cap
     (or purchasing a replacement Cap) during such Interim Extension Period and
     the Cap Threshold Rate during the Interim Extension Period shall be six
     percent (6%) per annum; provided, however, if the Holiday Inn Select,
     Niagara Falls, New York Sale Property has been sold and Released from the
     Lien of the applicable Mortgage in accordance with the provisions of this
     Agreement prior to June 30, 2005, Lender shall be required to and shall
     promptly pay all such costs and expenses of so extending the Cap (or
     purchasing such a replacement Cap) during such Interim Extension Period."

     (i) Section 2.5(B)(vi) of the Loan Agreement is hereby amended by deleting
the words "five percent (5%)" in the fifth (5th) line thereof and substituting
the words "six percent (6%)" in lieu thereof.

     (j) Clause (d) of Section 5.1(A)(v) of the Loan Agreement is hereby
amended by adding: "(except for Required Immediate Repairs as set forth on
Schedule 6.5)" immediately after the words "Capital Improvement Reserve" in the
fourth (4th) line of such clause (d).

     (k) Section 11.4(C) of the Loan Agreement is hereby deleted in its
entirety and superseded by the following:

         (C) Lender shall have received from the Borrowers on the date proposed
     for such Release, the Release Price (together with, except in connection
     with (i) a Release of a Sale Property [in which case no Prepayment
     Consideration will be due], or (ii) a Release of an Additional


                                      3


     Sale Property [in which case the Prepayment Consideration shall be an
     amount equal to one-half of one percent (0.5%) of the principal amount of
     the Loan being prepaid with respect to any prepayment made prior to the
     Payment Date in July 2006, and thereafter none], the applicable Prepayment
     Consideration and any prepayment consideration due pursuant to the terms
     of the Mezzanine Loan Documents) for deposit into the Lock Box Account and
     disbursement in accordance with the terms of the Cash Management Agreement,
     and following such disbursement, Lender shall have received Mortgage
     Lender's Percentage of the Release Price and Mezzanine Lender shall have
     received Mezzanine Lender's Percentage of the Release Price;

     (l) Section 11.4(E) of the Loan Agreement is hereby amended by replacing
"(other than a Release of a Sale Property)" with "(other than a Release of a
Sale Property or an Additional Sale Property)" in the first (1st) line thereof.

     (m) Section 11.4(F) of the Loan Agreement is hereby deleted in its
entirety and superseded by the following:

         (F) Notwithstanding the foregoing, the Borrowers may not obtain the
     Release under this Section 11.4 of any Property or Properties (other than
     the Sale Properties) which individually, or in the aggregate (with all
     Releases of Properties other than the Sale Properties since the Closing
     Date), have an Aggregate Allocated Loan Amount of more than thirty percent
     (30%) of the Loan Amount (exclusive of the Allocated Loan Amount with
     respect to any Sale Property);

     (n) Schedule 2.4 to the Loan Agreement, setting forth the Scheduled
Mortgage Principal Payments with respect to the Loan, is hereby deleted in its
entirety and superceded by Schedule 2.4 attached hereto ("REPLACEMENT SCHEDULE
2.4") and all references in the Loan Agreement and the other Loan Documents to
(i) "Schedule 2.4" are hereby deemed to refer to Replacement Schedule 2.4 and
(ii) "Scheduled Mortgage Principal Payments" are hereby deemed to refer to the
Scheduled Mortgage Principal Payments set forth on Replacement Schedule 2.4.

     (o) Schedule 6.5 to the Loan Agreement, setting forth the Required Capital
Improvements to be performed with respect to the Properties, is hereby deleted
in its entirety and superceded by Schedule 6.5 attached hereto ("REPLACEMENT
SCHEDULE 6.5") and all references in the Loan Agreement and the other Loan
Documents to (i) "Schedule 6.5" are hereby deemed to refer to Replacement
Schedule 6.5 and (ii) "Required Capital Improvements" are hereby deemed to refer
to the Required Capital Improvements set forth on Replacement Schedule 6.5.

     (p) Schedule 6.6 to the Loan Agreement, setting forth Environmental Work
to be performed with respect to the Properties, is hereby deleted in its
entirety and superceded by Schedule 6.6 attached hereto ("REPLACEMENT SCHEDULE
6.6") and all references in the Loan Agreement and the other Loan Documents to
(i) "Schedule 6.6" are hereby deemed to refer to

                                       4



Replacement Schedule 6.6 and (ii) "Environmental Work" are hereby deemed to
refer to the Environmental Work set forth on Replacement Schedule 6.6.

     2. The Borrowers wish to obtain the Release of the St. Louis Property from
the Lien of the Mortgage thereon. Notwithstanding anything to the contrary
contained in Section 11.4 of the Loan Agreement or otherwise in the Loan
Agreement or the other Loan Documents, the parties agree that the Release of
the St. Louis Property shall be upon the following terms and subject to
satisfaction of the following conditions on or before the Release Date therefor:

     (a) Borrowers shall be required to pay to Lender a Release Price for the
St. Louis Property in the amount of $4,800,000 (100% of the Allocated Loan
Amount applicable thereto), receipt of which is hereby acknowledged by Lender.
The amount payable to Lender for the Release Price for the St. Louis Property
shall be offset by certain amounts more particularly set forth on the settlement
statement with respect to the release of the St. Louis Property executed by
Borrowers and Lender.

     (b) No Prepayment Consideration shall be payable by Borrowers in
connection with the payment of the Release Price as provided in Section 2(a)
above.

     (c) For all other purposes under the Loan Agreement, including, without
limitation, Sections 11.4(E) and 11.4(F) thereof, the Release of the St. Louis
Property shall be treated as if the St. Louis Property were a Sales Property.

     (d) Lender has executed and delivered to Borrowers, concurrently with the
execution and delivery of this Modification Agreement, a release or releases or
terminations, as applicable, of the Mortgage and the Assignment of Leases and
the Financing Statements encumbering the St. Louis Property in recordable form,
and Borrowers are hereby authorized to record the same in the applicable
recording office in order to evidence of record the Release of the St. Louis
Property from the Collateral for the Loan.

     3. Prior to the date hereof, the Properties located in Florence, Kentucky,
Niagara Falls, New York (Four Points Sheraton), Morgantown, West Virginia, Grand
Island, New York, Memphis, Tennessee (Holiday Inn), and Pittsburgh, Pennsylvania
(Holiday Inn Parkway East), as more particularly identified on Schedule A
attached hereto (including the Release of the St. Louis Property, collectively,
the "RELEASED PROPERTIES"), have been released from the Liens of the applicable
Mortgages. Lender hereby confirms that each of Lodgian Florence LLC, Servico
Niagara Falls, Inc., Lodgian Morgantown LLC, Servico Grand Island, Inc., Lodgian
Memphis LLC, and APICO Hills, Inc., have been released from any all liabilities
and obligations as Borrowers under the Loan Agreement and the other Loan
Documents from and after the date of the respective Release of the applicable
Property owned by such entity. After giving effect to the Release of the St.
Louis Property, (a) the Properties remaining as Collateral for the Loan will be
the Properties listed on Exhibit A attached hereto ("REPLACEMENT EXHIBIT A");
(b) Exhibit A to the Loan Agreement, setting forth the Properties encumbered by
the Mortgages as Collateral for the Loan, is hereby deleted in its entirety and
superceded by Replacement Exhibit A; (c) all references in the Loan Agreement
and the other Loan Documents to (i) "Exhibit A" (to the Loan Agreement) are
hereby deemed to refer to Replacement Exhibit A

                                       5



and (ii) "Properties" are hereby deemed to refer to the Properties set forth on
Replacement Exhibit A; (d) all references to each of the Released Properties in
any of the Loan Documents and any of the exhibits and schedules attached
thereto, are hereby deemed deleted and no longer applicable; and (e) the
outstanding principal balance of the Loan will be $88,323,222.68.

     4. From and after the date hereof, all references to the Loan Agreement
and the Note in the Loan Documents shall mean the Loan Agreement and the Note,
as modified and amended hereby.

     5. Except as expressly amended hereby, all of the terms, covenants and
conditions of the Loan Agreement, the Note and the other Loan Documents are
hereby ratified and confirmed by Borrowers and remain unmodified and in full
force and effect. In the event of any conflict or ambiguity between the
provisions of this Modification Agreement and those of the Loan Agreement, the
Note and the other Loan Documents, the terms of this Modification Agreement
shall control.

     6. Borrowers hereby represent and warrant that, as of the date hereof, (a)
the execution, delivery and performance by each Borrower of the Modification
Agreement and the other agreements to be delivered in connection herewith and
consummation of the transactions contemplated hereby have been duly authorized
by all necessary limited liability company, partnership, trustee, corporate or
other action, as the case may be, (b) no Default or Event of Default has
occurred and is continuing under the Loan Agreement or any of the Loan Documents
and (c) no Material Adverse Effect has occurred with respect to any Borrower
Party or any Property.

     7. This Modification Agreement supercedes any prior agreement, oral or
written, between the parties hereto, and contains the entire agreement between
Borrowers and Lender with respect to the subject matter hereof.

     8. THIS MODIFICATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

     9. This Modification Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and all of which counterparts together shall constitute but one and
the same instrument.

                                       6



     IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Modification Agreement as of the date first written above.

                                    BORROWERS:

                                    BRUNSWICK MOTEL ENTERPRISES, INC.
                                    DOTHAN HOSPITALITY 3053, INC.
                                    DOTHAN HOSPITALITY 3071, INC.
                                    GADSDEN HOSPITALITY, INC.
                                    LODGIAN BRIDGEPORT LLC
                                    LODGIAN COLCHESTER LLC
                                    LODGIAN HAMBURG LLC
                                    LODGIAN HOTELS FLOATING, LLC
                                    LODGIAN JACKSON LLC
                                    LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                    SERVICO AUSTIN, INC.
                                    SERVICO CEDAR RAPIDS, INC.
                                    SERVICO JAMESTOWN, INC.
                                    SERVICO LANSING, INC.
                                    SERVICO MARYLAND, INC.
                                    SERVICO NEW YORK, INC.
                                    SERVICO PENSACOLA 7200, INC.
                                    SERVICO PENSACOLA 7330, INC.
                                    SERVICO WINTER HAVEN, INC.
                                    SHEFFIELD MOTEL ENTERPRISES, INC.

                                    By:      s/ Daniel E. Ellis
                                       ----------------------------------------
                                       Name:   Daniel E. Ellis
                                       Title:  Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                    LENDER:

                                    MERRILL LYNCH MORTGAGE LENDING, INC.

                                    By: s/ Robert Spinna
                                        Name: obert Spinna
                                        Title: Vice President




                              REPLACEMENT EXHIBIT A

                     REMAINING FLOATING RATE POOL PROPERTIES

                                                                            
Holiday Inn - Sheffield             4900 Hatch Blvd.          Sheffield        AL       35660
Quality Inn - Dothan                3053 Ross Clark           Dothan           AL       36301
Holiday Inn Express - Dothan        3071 Ross Clark Circle    Dothan           AL       36301
Holiday Inn - Winter Haven          1150 3rd St., SW          Winter Haven     FL       33880
Holiday Inn - Pensacola             7200 Plantation Rd.       Pensacola        FL       32504
Holiday Inn Express - Pensacola     7330 Plantation Rd.       Pensacola        FL       32504
Holiday Inn - Brunswick             5252 New Jesup Hwy        Brunswick        GA       31525
Marriott Fairfield Inn - Valdosta   1311 St. Augustine Rd.    Valdosta         GA       31601
Holiday Inn - Valdosta              1309 St. Augustine Rd.    Valdosta         GA       31601
Crown Plaza - Silver Spring         8777 Georgia Ave.         Silver Spring    MD       20910
Crowne Plaza - Cedar Rapids         350 1st Ave, NE           Cedar Rapids     IA       52401
Holiday Inn - Lansing               7501 W. Saginaw Hwy       Lansing          MI       48917
Holiday Inn - Hamburg               5440 Camp Road            Hamburg          NY       14075
Holiday Inn - Jamestown             150 W. 4th St.            Jamestown        NY       14701
Marriott Fairfield Inn - Jackson    535 Wiley Parker Road     Jackson          TN       38305
Marriott Fairfield Inn - Colchester 15 South Park Drive       Colchester       VT       05446
Holiday Inn - Bridgeport            100 Lodgeville Road       Bridgeport       WV       26330

Sale Properties
Holiday Inn Select - Niagara Falls  300 Third St.             Niagara Falls    NY       14303
Holiday Inn - Austin                3401 South I-35           Austin           TX       78741

Additional Sale Properties(1)
Holiday Inn Express - Attalla       801 Cleveland Ave.        Attalla          AL       35954
Clarion Hotel - Louisville          9700 Blue Grass Parkway   Louisville       KY       40299
French Quarter Suites - Memphis     2144 Madison Ave.         Memphis          TN       38104



- ------------
(1) From and after Release of Holiday Inn Select, Niagara Falls, New York Sale
    Property

                              Replacement Exhibit A



                                   SCHEDULE A

                               RELEASED PROPERTIES

                                                                            
Holiday Inn - St. Louis         4545 N. Lindbergh Blvd.     St. Louis         MO        63044
Four Points - Niagara Falls     114 Buffalo Ave.            Niagara Falls     NY        14303
Holiday Inn - Grand Island      100 Whitehaven Rd.          Grand Island      NY        14072
Holiday Inn - Florence          8055 Holiday Drive          Florence          KY        41042
Holiday Inn - Memphis           6101 Shelby Oaks Drive      Memphis           TN        38134
Holiday Inn - Morgantown        1400 Saratoga Avenue        Morgantown        WV        26505
Holiday Inn - Parkway East      915 Brinton Road            Pittsburgh        PA        15221



                                   Schedule A

                            REPLACEMENT SCHEDULE 2.4

                           SCHEDULED MORTGAGE PAYMENTS

*Note: The Payment Date is the 11th day of each calendar month. If the 11th day
is not a Business Day, then the Payment Date is the preceding Business Day.





               PAYMENT                LOAN                    SCHEDULED                    BALLOON
PERIOD          DATE*                BALANCE                   PRINCIPAL                  PRINCIPAL
- -----------------------------------------------------------------------------------------------------
                                                                            
                                 88,323,222.68
  10           05/11/05          88,236,224.87                86,997.81
  11           06/11/05          88,169,206.53                67,018.34
  12           07/11/05          88,081,130.61                88,075.92
  13           08/11/05          88,012,990.42                68,140.19
  14           09/11/05          87,944,357.35                68,633.07
  15           10/11/05          87,854,707.48                89,649.87
  16           11/11/05          87,784,929.49                69,777.99
  17           12/11/05          87,694,163.63                90,765.86
  18           01/11/06          87,623,224.38                70,939.25
  19           02/11/06          87,551,772.00                71,452.38
  20           03/11/06          87,418,516.54               133,255.46
  21           04/11/06          87,345,583.44                72,933.10
  22           05/11/06          87,251,742.15                93,841.29
  23           06/11/06          87,177,602.71                74,139.44
  24           07/11/06          87,082,585.56                95,017.15
  25           08/11/06          87,007,222.56                75,363.00
  26           09/11/06          86,931,314.43                75,908.13
  27           10/11/06          86,834,573.26                96,741.17
  28           11/11/06          86,757,416.30                77,156.96
  29           12/11/06          86,659,457.84                97,958.46
  30           01/11/07          86,581,034.22                78,423.62
  31           02/11/07          86,502,043.33                78,990.89
  32           03/11/07          86,361,929.64               140,113.69
  33           04/11/07          86,281,353.89                80,575.75
  34           05/11/07          86,180,063.00               101,290.89
  35           06/11/07          86,098,171.75                81,891.25
  36           07/11/07          85,995,598.58               102,573.17
  37           08/11/07          85,912,373.04                83,225.54
  38           09/11/07          85,828,545.50                83,827.54
  39           10/11/07          85,724,084.95               104,460.55
  40           11/11/07          85,638,895.46                85,189.49
  41           12/11/07          85,533,107.36               105,788.10
  42           01/11/08          85,446,536.47                86,570.89
  43           02/11/08          85,359,339.38                87,197.09
  44           03/11/08          85,231,677.21               127,662.17
  45           04/11/08          85,142,925.97                88,751.24
  46           05/11/08          85,033,666.08               109,259.89
  47           06/11/08          84,943,482.56                90,183.52
  48           07/11/08          84,832,826.57               110,655.99
  49           08/11/08          84,741,190.31                91,636.26
  50           09/11/08          84,648,891.22                92,299.09
  51           10/11/08          84,536,173.09               112,718.13
  52           11/11/08          84,442,391.04                93,782.05
  53           12/11/08          84,328,227.41               114,163.63
  54           01/11/09          84,232,941.22                95,286.19
  55           02/11/09          84,136,965.79                95,975.43
  56           03/11/09          83,981,400.26               155,565.53
  57           04/11/09          83,883,605.35                97,794.91
  58           05/11/09          83,765,530.22               118,075.13
  59           06/11/09          83,666,173.85                99,356.37
  60           07/11/09          83,546,576.70               119,597.15
  61           08/11/09          83,445,636.57               100,940.13
  62           09/11/09          83,343,966.30               101,670.27
  63           10/11/09          83,222,113.69               121,852.61
  64           11/11/09          83,118,826.61               103,287.08
  65           12/11/09          82,995,398.03               123,428.58
  66           01/11/10                                      104,926.99                 82,890,471.04
- -----------------------------------------------------------------------------------------------------


                            Replacement Schedule 2.4




                            Replacement Schedule 2.4

                            REPLACEMENT SCHEDULE 6.5

                          REQUIRED CAPITAL IMPROVEMENTS



- ------------------------------------------------------------------------------------------------------------------------------------
                                                                             IMMEDIATE                                     REQUIRED
 ML   LODGIAN  LOCATION     PROPERTY                                          REPAIR                                      COMPLETION
CODE   CODE      CODE         NAME           ADDRESS        CITY      STATE    COSTS       REQUIRED IMMEDIATE REPAIRS        DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                               
 18    ssp       1720    Holiday Inn -   8777 Georgia    Silver         MD    $124,074    Sidewalk Brick Repair             June 30,
                         Silver Spring   Ave.            Spring                          ($4,375) Concrete Stop              2005
                                                                                         ($1,500) Concrete
                                                                                         Loading Dock ($2,125)
                                                                                         Skylights ($5,000)
- ------------------------------------------------------------------------------------------------------------------------------------
 43    lan       3970    Holiday Inn -   7501 W.         Lansing        MI          $0   N/A                                 N/A
                         Lansing         Saginaw Hwy
- ------------------------------------------------------------------------------------------------------------------------------------
 63    cwv       4899    Holiday Inn -   100 Lodgeville  Bridgeport     WV    $221,486   Roadways and Paving/              June 30,
                         Bridgeport      Road                                            Pedestrian Sidewalks ($10,450)      2005
                                                                                         Repair Chain-Link Fence
                                                                                         ($725) Repair Deterioration
                                                                                         at Pool Decks, Replace
                                                                                         Deteriorated Concrete Slab
                                                                                         Near Pool Entry and
                                                                                         Maintenance Shop ($2,968)
                                                                                         Have Structural Engineer
                                                                                         Evaluate Floor Displacement
                                                                                         ($23,403) Replace Failing
                                                                                         Flat Roof ($5,250) Power
                                                                                         Wash Exterior Dryvit Walls
                                                                                         ($47,810) Renovate Lobby
                                                                                         and Registration Areas
                                                                                         ($31,250) Guestroom Finishes
                                                                                         ($98,500) HVAC ($1,131)
- ------------------------------------------------------------------------------------------------------------------------------------
 1     shf        210    Holiday Inn -   4900 Hatch      Sheffield      AL     $56,512   ADA Accessibility ($17,419)       July 31,
                         Sheffield       Blvd.                                           Signage ($16,250) Storage Shed      2005
                                                                                         ($793) Common Area Carpet
                                                                                         ($22,050)
- ------------------------------------------------------------------------------------------------------------------------------------
 3     dha        230    Holiday Inn     3071 Ross       Dothan         AL        $125   ADA accessibility ($125)          June 30,
                         Express -       Clark Circle                                                                        2005
                         Dothan
- ------------------------------------------------------------------------------------------------------------------------------------
 9     uma       1116    Holiday Inn -   7200 Plantation Pensacola      FL      $3,884   Asphalt Repair ($884) Window      June 30,
                         Pensacola       Rd.                                             Units Sash Replacement ($3,000)     2005
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5



- ------------------------------------------------------------------------------------------------------------------------------------
                                                                             IMMEDIATE                                     REQUIRED
 ML   LODGIAN  LOCATION     PROPERTY                                          REPAIR                                      COMPLETION
CODE   CODE      CODE         NAME           ADDRESS        CITY      STATE    COSTS       REQUIRED IMMEDIATE REPAIRS        DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                               

 12    brw       1206    Park Inn        5252 New        Brunswick      GA      $9,854   Sheet Vinyl ($7,875) Guestroom    June 30,
                         (formerly       Jesup Hwy                                       Carpet ($1,979)                     2005
                         Holiday Inn) -
                         Brunswick
- ------------------------------------------------------------------------------------------------------------------------------------
 11    pns       1168    Holiday Inn     7330            Pensacola      FL      $6,428   ADA Accessibility ($4,313)        June 30,
                         Express  -      Plantation Rd.                                  Asphalt Repair ($2,115)             2005
                         Pensacola
- ------------------------------------------------------------------------------------------------------------------------------------
 16    vhi       1285    Holiday Inn -   1309 St.        Valdosta       GA      $6,563   Common Area Floors Ceramic        June 30,
                         Valdosta        Augustine Rd.                                   ($6,563)                            2005
- ------------------------------------------------------------------------------------------------------------------------------------
 10    wnh       1132    Holiday Inn -   1150 3rd St.,   Winter         FL      $6,646   ADA Accessibility ($1,958) Wood   June 30,
                         Winter Haven    SW              Haven                           Site Fence Replacement ($4,688)     2005
- ------------------------------------------------------------------------------------------------------------------------------------
 15    vfi       1280    Marriott        1311 St.        Valdosta       GA      $1,563   ADA accessibility ($1,563)        June 30,
                         Fairfield Inn - Augustine Rd.                                                                       2005
                         Valdosta
- ------------------------------------------------------------------------------------------------------------------------------------
 58    jtn       4205    Marriott        535 Wiley       Jackson        TN     $42,000   Repair Deteriorating Asphalt      June 30,
                         Fairfield Inn   Parker Road                                     Surfaces and Replace Dumpster       2005
                         - Jackson                                                       Pad ($3,750) Repair Undermining
                                                                                         at Front Retaining Wall and
                                                                                         Repair Damaged Timbers ($2,500)
                                                                                         Guestroom Finishes ($18,125)
                                                                                         ADA Accessibility ($17,625)
- ------------------------------------------------------------------------------------------------------------------------------------
 56    ham       3398    Holiday Inn -   5440 Camp       Hamburg        NY     $11,125   Replacement of Shutoff Valves     June 30,
                         Hamburg         Road                                            for each of the Rooms ($11,125)     2005
- ------------------------------------------------------------------------------------------------------------------------------------
 34    jam       3330    Holiday Inn -   150 W. 4th St.  Jamestown      NY      $2,500   Concrete Sectional Replacement    June 30,
                         Jamestown                                                       ($2,500)                            2005
- ------------------------------------------------------------------------------------------------------------------------------------
  4    gad        240    Holiday Inn     801 Cleveland   Attalla        AL    $149,959   ADA Accessibility ($20,313)       June 30,
                         Express -       Ave.                                            Asphalt Repair, Cut & Patch         2005
                         Attalla                                                         Overlay ($96,159) Concrete
                                                                                         Pool Deck Refinish ($3,750)
                                                                                         Concrete Guestroom Balconies
                                                                                         Refinish ($6,250) Concrete
                                                                                         Walkway from C to D Building
                                                                                         Refinish ($563) Fencing, Repair
                                                                                         and Paint ($4,500) Repair and
                                                                                         Replace Drywall Underside of
                                                                                         Guest Balconies ($2,500)
                                                                                         Common Area Floors Ceramic
                                                                                         ($6,250) Rooftop Package Unit
                                                                                         ($6,300) Repair Two (2) Down
                                                                                         uUnits ($3,375)
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5




- ------------------------------------------------------------------------------------------------------------------------------------
                                                                             IMMEDIATE                                     REQUIRED
 ML   LODGIAN  LOCATION     PROPERTY                                          REPAIR                                      COMPLETION
CODE   CODE      CODE         NAME           ADDRESS        CITY      STATE    COSTS       REQUIRED IMMEDIATE REPAIRS        DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                               
 28     lvl      2040    Clarion Hotel - 9700 Blue       Louisville     KY          $0   N/A                                  N/A
                         Louisville      Grass Parkway
- ------------------------------------------------------------------------------------------------------------------------------------
 46     mem      4215    French Quarter  2144 Madison    Memphis        TN     $70,875   Asphalt Overlay ($23,625)         June 30,
                         Suites -        Ave.                                            Concrete Pavement ($15,625)         2005
                         Memphis                                                         Concrete Sectional Replacement
                                                                                         ($31,625)
- ------------------------------------------------------------------------------------------------------------------------------------
 60     bvt      4545    Marriott        15 South Park   Colchester     VT          $0   N/A                               June 30,
                         Fairfield Inn   Drive                                                                               2005
                         - Colchester
- ------------------------------------------------------------------------------------------------------------------------------------
  2     dhi       220    Quality Inn -   3053 Ross       Dothan         AL     $49,919   ADA Accessibility ($11,613)       June 30,
                         Dothan          Clark                                           Asphalt Repair Overlay ($21,425)    2005
                                                                                         Swimming Surround Tile Repair
                                                                                         ($3,125) Swimming Pool Interior
                                                                                         ($5,000) Exterior Soffits
                                                                                         Repair ($5,000) Drywall Repairs
                                                                                         ($3,750) Fire Alarm, Horn and
                                                                                         Strobe Lights ($6)
- ------------------------------------------------------------------------------------------------------------------------------------
 24     ced      1840    Crowne Plaza -  350 1st Ave,    Cedar         IA           $0   N/A                                 N/A
                         Cedar Rapids    NE              Rapids
- ------------------------------------------------------------------------------------------------------------------------------------
 32     nia      3314    Holiday Inn     300 Third St.   Niagara       NY      $13,000   Sidewalk Brick Repair ($4,375)    June 30,
                         Select -                        Falls                           Concrete Stop ($1,500) Concrete     2005
                         Niagara Falls                                                   Loading Dock ($2,125) Skylights
                                                                                         ($5,000)
- ------------------------------------------------------------------------------------------------------------------------------------
 49     aus      4375    Holiday Inn -   3401 South      Austin        TX      $98,836   ADA Accessibility ($46,375)       June 30,
                         Austin          I-35                                            Irrigatin System ($25,000)          2005
                                                                                         Mansard Roof System ($27,461)
- ------------------------------------------------------------------------------------------------------------------------------------
                         RESERVE                                              $875,349
                         AMOUNTS
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5




- ------------------------------------------------------------------------------------------------------------------------------------
                                                     SOFT GOODS &
                                     BANKRUPTCY       EQUIPMENT                                      SOFT GOODS &
                                    STIPULATIONS   REPLACEMENTS AND                    PROPERTY        EQUIPMENT
                                      CAPITAL       IMPROVEMENT &                    IMPROVEMENT   REPLACEMENTS AND
                                    IMPROVEMENTS     MAINTENANCE          REQUIRED      PLANS         IMPROVEMENT &       REQUIRED
  ML   LODGIAN  LOCATION  PROPERTY  REQUIRED BY    REPAIRS FOR THE       COMPLETION  REQUIRED BY   MAINTENANCE REPAIRS   COMPLETION
 CODE   CODE      CODE      NAME    FRANCHISORS      FOLLOWING:            DATE      FRANCHISORS    FOR THE FOLLOWING:      DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                              
 18     ssp      1720     Holiday            $0    N/A                      N/A       $2,280,084   Guestrooms ($609,974) Footnote(1)
                          Inn -                                                                    Guest Bathroom
                          Silver                                                                   ($289,675) Corridors
                          Spring                                                                   ($234,813)
                                                                                                   Prefunction Areas
                                                                                                   ($94,049) Boardrooms
                                                                                                   ($35,770) Entrance/
                                                                                                   Lobby/Front Desk
                                                                                                   ($114,541) Building
                                                                                                   General ($365,797)
                                                                                                   Allowance for Tax,
                                                                                                   Freight, Payroll &
                                                                                                   Overhead ($535,466)
- ------------------------------------------------------------------------------------------------------------------------------------
 43     lan      3970     Holiday    $1,096,272    Guestrooms            Footnotes(1)         $0   N/A                      N/A
                          Inn -                    ($530,691) Guest         (2)
                          Lansing                  Bathroom ($41,978)
                                                   Corridors ($143,168)
                                                   Meeting & Breakout
                                                   Rooms ($87,066)
                                                   Prefunction Areas
                                                   ($27,890) Boardrooms
                                                   ($18,110) Public
                                                   Restrooms ($690)
                                                   Entrance/Lobby/
                                                   Front Desk ($112,412)
                                                   Laundry Area/
                                                   Housekeeping ($5,450)
                                                   Building General
                                                   ($86,257) Building
                                                   Systems ($42,560)
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5




- ------------------------------------------------------------------------------------------------------------------------------------
                                                    SOFT GOODS &
                                      BANKRUPTCY      EQUIPMENT                                      SOFT GOODS &
                                     STIPULATIONS  REPLACEMENTS AND                     PROPERTY        EQUIPMENT
                                       CAPITAL      IMPROVEMENT &                     IMPROVEMENT   REPLACEMENTS AND
                                     IMPROVEMENTS    MAINTENANCE          REQUIRED       PLANS         IMPROVEMENT &      REQUIRED
  ML   LODGIAN  LOCATION  PROPERTY   REQUIRED BY   REPAIRS FOR THE       COMPLETION   REQUIRED BY   MAINTENANCE REPAIRS  COMPLETION
 CODE   CODE      CODE      NAME     FRANCHISORS     FOLLOWING:            DATE       FRANCHISORS    FOR THE FOLLOWING:     DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                              
 63     cwv      4899     Holiday      $58,535     Corridors ($11,792)   Footnotes(1)       $0      N/A                       N/A
                          Inn  -                   Beverage Outlet 2 -       (2)
                          Bridgeport               Type of Outlet: Full
                                                   Service ($21,106)
                                                   Entrance/Lobby/Front
                                                   Desk ($5,600)
                                                   Laundry
                                                   Area/Housekeeping
                                                   ($5,037) Kitchen
                                                   ($6,800) Building
                                                   General ($8,200)
- ------------------------------------------------------------------------------------------------------------------------------------
  1     shf       210     Holiday           $0     N/A                       N/A      $1,578,008    Guestrooms           Footnote(1)
                          Inn -                                                                     ($587,207) Guest
                          Sheffield                                                                 Bathroom ($110,638)
                                                                                                    Corridors ($37,610)
                                                                                                    Meeting & Breakout
                                                                                                    Rooms ($133,725)
                                                                                                    Prefunction Areas
                                                                                                    ($43,844) Boardrooms
                                                                                                    ($24,969) Beverage
                                                                                                    Outlet 2 - Type of
                                                                                                    Outlet: Full Service
                                                                                                    ($170,417) Restaurant
                                                                                                    1 - Type of
                                                                                                    Restaurant - Full
                                                                                                    Service ($68,204)
                                                                                                    Public Restrooms
                                                                                                    ($24,504) Executive
                                                                                                    Offices ($6,846)
                                                                                                    Entrance/Lobby/Front
                                                                                                    Desk ($88,513)
                                                                                                    Laundry Area/
                                                                                                    Housekeeping
                                                                                                    ($9,163) Kitchen
                                                                                                    ($17,956) Building
                                                                                                    General ($254,412)
- ------------------------------------------------------------------------------------------------------------------------------------
  3     dha       230     Holiday           $0     N/A                       N/A             $0     N/A                      N/A
                          Inn
                          Express -
                          Dothan
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5




- ------------------------------------------------------------------------------------------------------------------------------------
                                                       SOFT GOODS &
                                     BANKRUPTCY          EQUIPMENT                                  SOFT GOODS &
                                    STIPULATIONS      REPLACEMENTS AND                 PROPERTY       EQUIPMENT
                                      CAPITAL          IMPROVEMENT &                 IMPROVEMENT  REPLACEMENTS AND
                                    IMPROVEMENTS        MAINTENANCE       REQUIRED      PLANS        IMPROVEMENT &        REQUIRED
  ML   LODGIAN  LOCATION  PROPERTY  REQUIRED BY       REPAIRS FOR THE    COMPLETION  REQUIRED BY  MAINTENANCE REPAIRS    COMPLETION
 CODE   CODE      CODE      NAME    FRANCHISORS         FOLLOWING:          DATE     FRANCHISORS   FOR THE FOLLOWING:       DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                              
   9     uma      1116    Holiday      $19,950     Beverage Outlet 2 -   Footnotes(1)       $0    N/A                       N/A
                          Inn -                    Type of Outlet - Full     (2)
                          Pensacola                Service ($15,825)
                                                   Allowance for Tax,
                                                   Freight, Payroll &
                                                   Overhead ($4,125)
- ------------------------------------------------------------------------------------------------------------------------------------
  12     brw      1206    Park Inn          $0     N/A                        N/A     $840,286    Guest Bathroom         Footnote(1)
                          (formerly                                                               ($48,366) Meeting &
                          Holiday                                                                 Breakout Rooms
                          Inn) -                                                                  ($22,790) Beverage
                          Brunswick                                                               Outlet 1 - Type of
                                                                                                  Outlet: Lobby Bar
                                                                                                  ($30,657) Restaurant 1
                                                                                                  - Type of Restaurant -
                                                                                                  Full Service
                                                                                                  ($200,000)
                                                                                                  Public Restrooms
                                                                                                  ($11,985) Executive
                                                                                                  Offices ($7,335)
                                                                                                  Entrance/Lobby/Front
                                                                                                  Desk ($45,072)
                                                                                                  Kitchen ($6,800)
                                                                                                  Building General
                                                                                                  ($321,240) Technology
                                                                                                  ($114,856) Allowance
                                                                                                  for Tax, Freight,
                                                                                                  Payroll & Overhead
                                                                                                  ($31,185)
- ------------------------------------------------------------------------------------------------------------------------------------
  11     pns      1168    Holiday           $0     N/A                        N/A           $0    N/A                       N/A
                          Inn
                          Express -
                          Pensacola
- ------------------------------------------------------------------------------------------------------------------------------------
  16     vhi      1285    Holiday           $0     N/A                        N/A           $0     N/A                       N/A
                          Inn -
                          Valdosta
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5




- ------------------------------------------------------------------------------------------------------------------------------------
                                                     SOFT GOODS &
                                     BANKRUPTCY        EQUIPMENT                                       SOFT GOODS &
                                    STIPULATIONS    REPLACEMENTS AND                   PROPERTY         EQUIPMENT
                                      CAPITAL        IMPROVEMENT &                   IMPROVEMENT     REPLACEMENTS AND
                                    IMPROVEMENTS      MAINTENANCE        REQUIRED        PLANS         IMPROVEMENT &      REQUIRED
  ML   LODGIAN  LOCATION  PROPERTY  REQUIRED BY     REPAIRS FOR THE     COMPLETION    REQUIRED BY   MAINTENANCE REPAIRS  COMPLETION
 CODE   CODE      CODE      NAME    FRANCHISORS       FOLLOWING:          DATE       FRANCHISORS    FOR THE FOLLOWING:      DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                              
 10     wnh       1132    Holiday         $773    Prefunction Areas     Footnotes(1)       $0       N/A                       N/A
                          Inn -                   ($447) Laundry           (2)
                          Winter                  Area/Housekeeping
                          Haven                   ($326)
- ------------------------------------------------------------------------------------------------------------------------------------
 15     vfi       1280    Marriott          $0    N/A                       N/A            $0       N/A                       N/A
                          Fairfield
                          Inn -
                          Valdosta
- ------------------------------------------------------------------------------------------------------------------------------------
 58     jtn       4205    Marriott          $0    N/A                       N/A            $0       N/A                       N/A
                          Fairfield
                          Inn  -
                          Jackson
- ------------------------------------------------------------------------------------------------------------------------------------
 56     ham       3398    Holiday     $256,243    Guestrooms ($189,403) Footnotes(1)        $0      N/A                       N/A
                          Inn  -                  Corridors ($33,600)       (2)
                          Hamburg                 Kitchen ($3,400)
                                                  Allowance for Tax,
                                                  Freight, Payroll &
                                                  Overhead ($29,840)
- ------------------------------------------------------------------------------------------------------------------------------------
 34     jam       3330    Holiday           $0    N/A                        N/A            $0      N/A                       N/A
                          Inn -
                          Jamestown
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5




- ------------------------------------------------------------------------------------------------------------------------------------
                                                        SOFT GOODS &
                                      BANKRUPTCY         EQUIPMENT                                   SOFT GOODS &
                                     STIPULATIONS     REPLACEMENTS AND                  PROPERTY        EQUIPMENT
                                       CAPITAL         IMPROVEMENT &                  IMPROVEMENT   REPLACEMENTS AND
                                     IMPROVEMENTS       MAINTENANCE       REQUIRED       PLANS         IMPROVEMENT &      REQUIRED
  ML   LODGIAN  LOCATION  PROPERTY   REQUIRED BY      REPAIRS FOR THE    COMPLETION   REQUIRED BY   MAINTENANCE REPAIRS  COMPLETION
 CODE   CODE      CODE      NAME     FRANCHISORS        FOLLOWING:          DATE      FRANCHISORS    FOR THE FOLLOWING:     DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                              
  4     gad        240    Holiday      $140,046    Guestrooms ($117,898) Footnotes(1)        $0     N/A                       N/A
                          Inn                      Building General          (2)
                          Express -                ($22,148)
                          Attalla
- ------------------------------------------------------------------------------------------------------------------------------------
 28     lvl       2040    Clarion            $0    N/A                       N/A             $0     N/A                       N/A
                          Hotel -
                          Louisville
- ------------------------------------------------------------------------------------------------------------------------------------
 46     mem       4215    French             $0    N/A                       N/A             $0     N/A                       N/A
                          Quarter
                          Suites -
                          Memphis
- ------------------------------------------------------------------------------------------------------------------------------------
 60     bvt       4545    Marriott           $0    N/A                       N/A             $0     N/A                       N/A
                          Fairfield
                          Inn -
                          Colchester
- ------------------------------------------------------------------------------------------------------------------------------------
  2     dhi        220    Quality            $0    N/A                       N/A             $0     N/A                       N/A
                          Inn -
                          Dothan
- ------------------------------------------------------------------------------------------------------------------------------------
 24     ced       1840    Crowne     $1,245,958    Guestrooms ($700,453) Footnotes(1)        $0     N/A                       N/A
                          Plaza -                  Boardrooms ($55,500)      (2)
                          Cedar                    Beverage Outlet 1 -
                          Rapids                   Type of Outlet: Lobby
                                                   Bar ($24,525)
                                                   Restaurant 1 - Type
                                                   of Restaurant - Full
                                                   Service ($175,513)
                                                   Entrance/Lobby/Front
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5




- ------------------------------------------------------------------------------------------------------------------------------------
                                                       SOFT GOODS &
                                     BANKRUPTCY          EQUIPMENT                                   SOFT GOODS &
                                    STIPULATIONS      REPLACEMENTS AND                 PROPERTY        EQUIPMENT
                                      CAPITAL          IMPROVEMENT &                 IMPROVEMENT   REPLACEMENTS AND
                                    IMPROVEMENTS        MAINTENANCE       REQUIRED      PLANS         IMPROVEMENT &       REQUIRED
  ML   LODGIAN  LOCATION  PROPERTY  REQUIRED BY       REPAIRS FOR THE    COMPLETION  REQUIRED BY   MAINTENANCE REPAIRS   COMPLETION
 CODE   CODE      CODE      NAME    FRANCHISORS         FOLLOWING:          DATE     FRANCHISORS    FOR THE FOLLOWING:      DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                              

                                                   Desk ($81,023)
                                                   Building General
                                                   ($875) Allowance for
                                                   Tax, Freight, Payroll
                                                   & Overhead ($208,069)
- ------------------------------------------------------------------------------------------------------------------------------------
 32     nia       3314    Holiday            $0    N/A                       N/A             $0    N/A                       N/A
                          Inn Select
                          - Niagara
                          Falls
- ------------------------------------------------------------------------------------------------------------------------------------
 49     aus       4375    Holiday            $0    N/A                       N/A             $0    N/A                       N/A
                          Inn -
                          Austin
- ------------------------------------------------------------------------------------------------------------------------------------
                          RESERVE    $2,817,775                                      $4,698,379
                          AMOUNTS
- ------------------------------------------------------------------------------------------------------------------------------------


                            Replacement Schedule 6.5


Footnotes:

(1)
This amount shall be held by Lender during the Term of the Loan as security for
the Obligations and not disbursed to or on behalf of the Borrowers unless and
until the Borrowers perform the related items of Work to which such amount
relates and satisfy the terms and conditions for disbursement of such amount as
set forth in Section 6.7. The Borrowers shall not be required to perform the
related items of Work unless and until (i) any Borrower Party receives written
demand from the applicable Franchisor for performance of such Work or a notice
of default from such Franchisor as a result of the failure to perform such Work
(and, in either case, the Borrowers shall be required deliver a copy of any such
Franchisor demand or notice of default to Lender promptly after receipt
thereof), (ii) Lender reasonably determines that failure to perform such Work
will result in a default under the applicable Franchise Agreement or (iii) an
Event of Default has occurred and is continuing.


(2)
If Borrowers obtain and deliver to Lender a written waiver or release of the
Borrowers from the requirements to perform any of such Work from
Intercontinental Hotels Group, which waiver or release is in form and substance
reasonably acceptable to Lender, Borrowers shall Iave no further obligation
hereunder with respect to such portion of the Work, and the amounts specified
herein for such portion of the Work shall be promptly released to Borrowers.

                            Replacement Schedule 6.5


                            REPLACEMENT SCHEDULE 6.6

                               ENVIRONMENTAL WORK



LODGIAN HOTEL PORTFOLIO
REQUIRED ENVIRONMENTAL WORK
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          REQUIRED
 ML   LODGIAN  LOCATION                                                                                     REMEDIATION  COMPLETION
CODE   CODE     CODE    PROPERTY NAME       ADDRESS           CITY     STATE   REQUIRED ENVIRONMENTAL WORK  COSTS          DATE
- ----  -------  -------- -------------   -----------------  ----------  -----   ---------------------------  -----------  -----------
                                                                                              
FIXED FLOATING LOAN
 18   ssp      1720     Holiday Inn-    8777 Georgia Ave.  Silver       MD     None                                  $0  Not
                        Silver Spring                      Spring                                                        Applicable
 43   lan      3970     Holiday Inn -   7501 W. Saginaw    Lansing      MI     (1) Develop and implement           $495  Completed
                        Lansing         Hwy                                    an asbestos Operations and
                                                                               Maintenance Program ($495).
 63   cwv      4899     Holiday Inn -   100 Lodgeville     Bridgeport   WV     Asbestos was found in the             $0  Completed
                        Bridgeport      Road                                   tan vinyl floor tiles, tan
                                                                               vinyl floor tile mastic, and
                                                                               grey vinyl floor tiles,
                                                                               based on laboratory results
                                                                               from samples taken by
                                                                               Building Evaluation Services
                                                                               and Technology and review
                                                                               of a previous report.
                                                                               Building Evaluation Services
                                                                               and Technology recommends
                                                                               that the subject property
                                                                               continue to follow the
                                                                               Asbestos Operations
                                                                               and Maintenance Program
                                                                               prepared by Building
                                                                               Evaluation Services and
                                                                               Technology, dated March 11,
                                                                               2003, for the tan vinyl floor
                                                                               tiles, tan vinyl floor tile
                                                                               mastic, and grey vinyl floor
                                                                               tiles, that is currently in
                                                                               place at the subject
                                                                               property.
  1   shf      210      Holiday Inn -   4900 Hatch Blvd.   Sheffield    AL     None                                  $0  Not
                        Sheffield                                                                                        Applicable
  3   dha      230      Holiday Inn     3071 Ross Clark    Dothan       AL     None                                  $0  Not
                        Express-Dothan  Circle                                                                           Applicable
  9   uma      1116     Holiday Inn -   7200 Plantation    Pensacola    FL     (1) Abate a limited quantity        $900  Completed
                        Pensacola       Rd.                                    of damaged asbestos-
                                                                               containing floor tile
                                                                               ($700-900) and continue to
                                                                               implement the existing
                                                                               asbestos Operations and
                                                                               Maintenance Program. (2)
                                                                               In-house personnel to
                                                                               clean up limited
                                                                               quantities of suspect mold
                                                                               on textured ceiling
                                                                               material.
 12   brw      1206     Holiday Inn -   5252 New Jesup     Brunswick    GA     None                                  $0  Not
                        Brunswick       Hwy                                                                              Applicable
 11   pns      1168     Holiday Inn     7330 Plantation    Pensacola    FL     None                                  $0  Not
                        Express -       Rd.                                                                              Applicable
                        Pensacola


                                  Schedule 6.6



LODGIAN HOTEL PORTFOLIO
REQUIRED ENVIRONMENTAL WORK
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          REQUIRED
 ML   LODGIAN  LOCATION                                                                                     REMEDIATION  COMPLETION
CODE   CODE     CODE    PROPERTY NAME       ADDRESS           CITY     STATE   REQUIRED ENVIRONMENTAL WORK  COSTS          DATE
- ----  -------  -------- -------------   -----------------  ----------  -----   ---------------------------  -----------  -----------
                                                                                              
 16   vhi      1285     Holiday Inn -   1309 St.           Valdosta     GA     (1) Develop and implement         $495    Completed
                        Valdosta        Augustine Rd.                          an asbestos Operations and
                                                                               Maintenance Program
                                                                               ($495). (2) Limited area
                                                                               of suspect mold can be
                                                                               cleaned up by in-house
                                                                               maintenance staff.
 10   wnh      1132     Holiday Inn -   1150 3rd St., SW   Winter       FL     (1) Develop and implement       $2,495    Completed
                        Winter Haven                       Haven               an asbestos Operations and
                                                                               Maintenance Program ($495)
                                                                               and abate damaged ACM
                                                                               ($1,500-2,000). (2)
                                                                               Conduct mold assessment on
                                                                               unused building in the
                                                                               event that it is to be
                                                                               used in the future. (3) A
                                                                               monitoring well was
                                                                               observed at Project. The
                                                                               well is associated with
                                                                               the adjacent LUST site,
                                                                               who is the Responsible
                                                                               Party for the release. As
                                                                               such, no further
                                                                               investigation is
                                                                               recommended.
 15   vfi      1280     Marriott        1311 St.           Valdosta     GA     (1) Develop and implement         $495    Completed
                        Fairfield Inn - Augustine Rd.                          an asbestos Operations and
                        Valdosta                                               Maintenance Program ($495).
 58   jtn      4205     Marriott        535 Wiley Parker   Jackson      TN     None                                $0    Not
                        Fairfield Inn - Road                                                                             Applicable
                        Jackson
 56   ham      3398     Holiday Inn -   5440 Camp Road     Hamburg      NY     Asbestos was found in the           $0    Completed
                        Hamburg                                                tan floor tiles, based on
                                                                               laboratory results from
                                                                               samples taken by Building
                                                                               Evaluation Services and
                                                                               Technology. Therefore,
                                                                               Building Evaluation
                                                                               Services and Technology
                                                                               recommends that the
                                                                               subject property continue
                                                                               to follow the Asbestos
                                                                               Operations and Maintenance
                                                                               Program prepared by
                                                                               Building Evaluation
                                                                               Services and Technology,
                                                                               dated March 14, 2003, for
                                                                               the tan floor tiles, that
                                                                               is currently in place at
                                                                               the subject property.
 34   jam      3330     Holiday Inn -   150 W. 4th St.     Jamestown    NY     Provide tank closure              $750    Completed
                        Jamestown                                              documentation for review to
                                                                               confirm proper closure
                                                                               activities ($125 per hour
                                                                               not to exceed $750).
  4   gad      240      Holiday Inn     801 Cleveland      Attalla      AL     (1) Develop and implement         $495    Completed
                        Express -       Ave.                                   an asbestos Operations and
                        Attalla                                                Maintenance Program ($495).
 28   lvl      2040     Clarion Hotel - 9700 Blue Grass    Louisville   KY     (1) Previously conducted          $495    Completed
                        Louisville      Parkway                                mold survey identified
                                                                               areas of water damaged and
                                                                               mold - all areas have been
                                                                               remediated. The On-site
                                                                               Point of Contact indicated
                                                                               that the property has a
                                                                               mold prevention program.
                                                                               EMG recommends the
                                                                               continued implementation
                                                                               of the existing mold
                                                                               prevention program.
 46   mem      4215     French Quarter  2144 Madison Ave.  Memphis      TN     None                                $0    Not
                        Suites -                                                                                         Applicable
                        Memphis
 46   bvt      4545     Marriott        15 South Park      Colchester   VT     None                                $0    Not
                        Fairfield Inn - Drive                                                                            Applicable
                        Colchester
 60   dhi      220      Quality Inn -   3053 Ross Clark    Dothan       AL     None                                $0    Not
                        Dothan                                                                                           Applicable
  2   ced      1840     Crowne Plaza -  350 1st Ave, NE    Cedar        IA     None                                $0    Not
                        Cedar Rapids                       Rapids                                                        Applicable
 29   Nia      3314     Holiday Inn     300 Third St.      Niagara      NY     (1) Develop and implement         $495    Completed
                        Select -                           Falls               an asbestos Operations and
                        Niagara Falls                                          Maintenance Program ($495).


                                  Schedule 6.6



LODGIAN HOTEL PORTFOLIO
REQUIRED ENVIRONMENTAL WORK
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          REQUIRED
 ML   LODGIAN  LOCATION                                                                                     REMEDIATION  COMPLETION
CODE   CODE     CODE    PROPERTY NAME       ADDRESS           CITY     STATE   REQUIRED ENVIRONMENTAL WORK  COSTS          DATE
- ----  -------  -------- -------------   -----------------  ----------  -----   ---------------------------  -----------  -----------
                                                                                              
 33   aus      4375     Holiday Inn -   3401 South I-35    Austin       TX     None                                $0    Not
                        Austin                                                                                           Applicable

                                                                               TOTAL REMEDIATION COST          $7,115
                                                                               RESERVE AMOUNT @ 125%           $8,894


                                  Schedule 6.6

EX-31.1

Exhibit 31.1

Sarbanes-Oxley Section 302 (a) Certification

I, W. Thomas Parrington, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the “Registrant”);
2)	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary 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 operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4)	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

e)	Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
f)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
g)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
h)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5)   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

c)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
d)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 10, 2005	By:	W. Thomas Parrington
		W. THOMAS PARRINGTON
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Sarbanes-Oxley Section 302 (a) Certification

I, Linda Borchert Philp, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the “Registrant”);
2)	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary 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 operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4)	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)	Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5)   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 10, 2005	By:	s/ Linda Borchert Philp
		LINDA BORCHERT PHILP
		Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Lodgian, Inc., (the “Company”) on Form 10-Q for the Quarterly period ended March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, W. Thomas Parrington, the Chief Executive Officer and Linda Borchert Philp, the Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge and after reasonable inquiry:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

LODGIAN, INC.
By:	s/ W. Thomas Parrington
	W. THOMAS PARRINGTON
	President and Chief Executive Officer

By:	s/ Linda Borchert Philp
	LINDA BORCHERT PHILP
	Executive Vice President and Chief Financial Officer

Date:      May 10, 2005     

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Lodgian, Inc. and will be retained by Lodgian, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.