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, 2008. The terms "Company", "we", "us" and "our" mean Lodgian and its wholly owned subsidiaries. Executive Overview
We are one of the largest independent hotel owners and operators in the United States in terms of our number of guest rooms, according to Hotel Business. 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", "Four Points by Sheraton", "Hilton", "Holiday Inn", "Marriott" and "Wyndham". Our hotels are primarily full-service properties that offer food and beverage services, meeting space and banquet facilities and compete in the midscale, upscale and upper upscale market segments of the lodging industry. We believe that these strong national brands afford us many benefits such as guest loyalty and market share premiums. As of June 30, 2009, we operated 38 hotels with an aggregate of 7,079 rooms, located in 22 states. Of the 38 hotels, 36 hotels, with an aggregate of 6,789 rooms, were held for use, while 2 hotels with an aggregate of 290 rooms, were held for sale. We consolidated all of these hotels in our financial statements. All of our hotels were wholly-owned and operated through subsidiaries, except for one hotel that we operated in a joint venture in the form of a limited partnership, in which a Lodgian subsidiary served as the general partner, had a 51% voting interest and exercised significant control.
As of June 30, 2009, we operated all but one of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operated 18 hotels under franchises obtained from InterContinental Hotels Group ("IHG") as franchisor of the Crowne Plaza, Holiday Inn and Holiday Inn Express brands. We operated 12 hotels under franchises from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott, Springhill Suites by Marriott, and Residence Inn by Marriott brands. We operated an additional seven hotels under other nationally recognized brands. Overview of Continuing Operations
Below is an overview of our results of operations for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, which are presented in more detail in "Results of Operations - Continuing Operations:"
• Second quarter revenues decreased $13.0 million or 19.2%. Rooms revenues decreased $9.9 million, or 19.8%, as occupancy and average daily rate decreased 12.4% and 8.4%, respectively. Food and beverage revenues declined $2.9 million, driven largely by fewer banquets and lower occupancy.

• Operating income decreased $6.7 million to a loss of $1.8 million. We realized the benefits of several cost containment initiatives as total operating expenses decreased $6.3 million, or 10.0%. However, these initiatives did not fully offset the $13.0 million decline in revenues since many of our operating costs are fixed in nature.

Overview of Discontinued Operations
The Condensed Consolidated Statements of Operations for discontinued operations for the six months ended June 30, 2009 and 2008 include the results of operations for the two hotels classified as held for sale at June 30, 2009, as well as all properties that have been sold in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144").
The assets held for sale at June 30, 2009 and December 31, 2008 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. Among other criteria, we classify an asset as held for sale if we expect to dispose of it within one year, we have initiated an active marketing plan to sell the asset at a reasonable price and it is unlikely that significant changes to the plan to sell the asset will be made. 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 June 30, 2009 remain properly classified in accordance with SFAS No. 144.
In June 2009, we reclassified the Holiday Inn Phoenix West, AZ from held for sale to held for use. As discussed in Note 7, we intend to surrender the hotel to the lender as we believe the hotel is currently worth less than the mortgage debt encumbering the hotel. Since we no longer intend to sell this hotel, it does not meet the criteria for classification as held for sale. We recorded a $3.1 million

impairment charge upon reclassification to write down the book value of the hotel to its estimated fair value. This charge is included in (Loss) income from continuing operations in the Company's Condensed Consolidated Statement of Operations.
Our continuing operations reflect the results of operations of those hotels which we are likely to retain in our portfolio for the foreseeable future, as well as those assets which do not currently meet the held for sale criteria in SFAS No. 144. We periodically evaluate the assets in our portfolio to ensure they continue to meet our performance objectives. Accordingly, from time to time, we could identify other assets for disposition.
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. During the three months ended June 30, 2009, we recorded impairment charges of $3.7 million on assets held for sale. 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 revenues and expenses during the reporting period. Actual results could differ from our estimates. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, approximately $120 million of outstanding mortgage debt was scheduled to mature in July 2009 and the current severe economic recession has negatively impacted our operating results, which affects operating cash flows as well as our ability to refinance the maturing indebtedness. The $120 million of mortgage indebtedness, which was originated in June 2004 by Merrill Lynch and securitized in the collateralized mortgage-backed securities market, was divided into three pools of indebtedness referred by the Company as the Merrill Lynch Fixed Rate Pools 1, 3 and 4 ("Pool 1", "Pool 3" and "Pool 4", respectively). We have reached agreements with the special servicers of Pools 1 and 4 to extend the maturity dates to July 1, 2010 and July 1, 2012, respectively, and have already begun the process of refinancing Pool 1 in anticipation of the 2010 maturity date. However, management can provide no assurance that the Company will be able to refinance Pool 1. We have entered into an agreement to extend the maturity date of Pool 3 to October 1, 2009 and management and the special servicer are in negotiations concerning a longer-term maturity extension for Pool 3. However, we can provide no assurance that we will be able to refinance or extend Pool 3. In the event that we are unable to achieve a long-term extension of Pool 3, we expect that anticipated cash flow from the hotels securing Pool 3 may not be sufficient to meet the related debt service obligations in the near-term. Accordingly, it may be necessary to transfer the properties securing Pool 3 to the lender in satisfaction of the mortgage obligations. Because of the anticipated cash flow shortfall, management does not believe that surrendering the hotels to the lender will have a material adverse effect on cash flows. In the absence of an extension, refinancing or repayment of Pool 1 and Pool 3, these factors raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classifications of recorded asset amounts or the amounts and classifications of liabilities or any other adjustments that may be necessary if we are unable to continue as a going concern.
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, 2008 ("Form 10-K"). In addition, our critical accounting policies and estimates are discussed in Item 7 of our Form 10-K, and we believe no material changes have occurred, except as discussed below.
In December 2007, the FASB issued FASB Statement No. 160, "Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51" ("SFAS No. 160"), which is an amendment to ARB No. 51 "Consolidated Financial Statements". SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that changes in a parent's ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company adopted the provisions of SFAS No. 160 on January 1, 2009. As a result of the adoption, the Company recorded noncontrolling interest as a component of equity in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Stockholders' Equity, and the net loss attributable to noncontrolling interests has been separately recorded in the Condensed Consolidated Statement of Operations.
The following table illustrates the effect (in thousands, except per share amounts) on net income and earnings per share for the three and six months ended June 30, 2008 as if the provisions of SFAS No. 160 were applied:

                                                                     Three Months Ended                Six Months Ended
                                                                          June 30,                         June 30,
                                                                                            2008
                                                                       (Unaudited in thousands, except per share data)
Income (loss) from continuing operations                          $                     284         $                (5,594 )
Less: Net loss attributable to noncontrolling interest                                  269                              44

Income (loss) from continuing operations attributable to
common stock                                                                            553                          (5,550 )
Income from discontinued operations                                                   6,083                           4,443

Net income (loss) attributable to common stock                    $                   6,636         $                (1,107 )


Denominator
Basic weighted average shares                                                        21,781                          22,213


Diluted weighted average shares                                                      21,826                          22,213


Basic income (loss) per common share:
Income (loss) from continuing operations attributable to
common stock                                                      $                    0.03         $                 (0.25 )
Income from discontinued operations                                                    0.28                            0.20

Net income (loss) attributable to common stock                    $                    0.30         $                 (0.05 )


Diluted income (loss) per common share:
Income (loss) from continuing operations attributable to
common stock                                                      $                    0.03         $                 (0.25 )
Income from discontinued operations                                                    0.28                            0.20

Net income (loss) attributable to common stock                    $                    0.30         $                 (0.05 )

Income Statement Overview
The discussion below relates to our 36 continuing operations hotels for the three months ended June 30, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Income Statement Overview" in our Form 10-K for a general description of the categorization of our revenues and expenses.
Results of Operations - Continuing Operations The analysis below compares the results of operations for the three months ended June 30, 2009 and 2008.
Revenues - Continuing Operations