1066138--3/16/2010--LODGIAN

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{debt, indebtedness, cash}

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{competitive, industry, competition}

{condition, economic, financial}

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{operation, natural, condition}

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Risks Related to Our Business The terms of our debt instruments place many restrictions on us, which reduce operational and financial flexibility and create default risks. Increases in interest rates could have an adverse effect on our cash flow and interest expense. The value of our hotels and our ability to service our indebtedness is dependent upon the successful operation and cash flows of our hotels. Our ability to generate cash depends on many factors beyond our control and a cash shortfall could adversely affect our ability to fund our operations, planned capital expenditures and other needs. The economic recession and adverse economic conditions in the specific major metropolitan markets in which we do substantial business could materially and adversely affect our business and results of operations. We may not be able to meet the requirements imposed by our franchisors in our franchise agreements and therefore could lose the right to operate one or more hotels under a national brand. Provisions for liquidated damages in our franchise agreements could require us to pay material amounts to our franchisors if we are forced to surrender properties to our lenders. Hotels typically require a higher level of capital expenditures, maintenance and repairs than other building types due in part to property improvement requirements that may be imposed by franchisors. The increasing age of our hotels could result in additional capital expenditures to remain competitive. If we are not able to meet the requirements of our hotels appropriately, our business and operating results will suffer. If we are not able to execute our strategic initiatives, we may not be able to improve our financial performance. We have a history of significant losses and we may not be able to successfully improve our performance to achieve profitability. Force majeure events, including natural disasters, acts and threats of terrorism, the ongoing war against terrorism, military conflicts and other factors have had and may continue to have a negative effect on the lodging industry and our results of operations. Our expenses may remain constant or increase even if revenues decline. Losses may exceed our insurance coverage or estimated reserves, which could impair our results of operations, financial condition and liquidity. Competition in the lodging industry could have a material adverse effect on our business and results of operations. The lodging business is seasonal. We are exposed to potential risks of brand concentration. We have experienced significant changes in our senior management team and Board of Directors. Our success is dependent on recruiting and retaining high caliber key personnel. The increasing use of third-party travel websites by consumers may adversely affect our profitability. We will be unable to utilize all of our net operating loss carryforwards. Many aspects of our operations are subject to government regulations, and changes in these regulations may adversely affect our results of operations and financial condition. Costs of compliance with environmental laws and regulations could adversely affect operating results. We may make acquisitions or investments that are not successful and that adversely affect our ongoing operations. Risks Related to Our Common Stock Our stock price may be volatile, and consequently, investors may be unable to resell their common stock at or above their purchase price. We may never pay dividends on our common stock, in which event our stockholders only return on their investment, if any, will occur on their sale of our common stock. Our charter documents, employment contracts and Delaware law may impede attempts to replace or remove our management or inhibit a takeover, which could adversely affect the value of our common stock. The decline in our common stock price and the threat of delisting or a delisting of our common stock could have materially adverse effects on our business. Risks Related to the Planned Merger The closing of the Merger is subject to the satisfaction of customary closing conditions, including the approval of the Merger by our stockholders. Failure to complete the Merger in a timely manner, or at all, could negatively impact the market price of our common stock and our future financial results and liquidity. The Merger could negatively impact our current and future business and financial results. The announcement of the Merger could have a negative impact on our ability to retain and, if necessary, attract key employees, which could in turn have an unfavorable impact on our financial results. Litigation has commenced against us in connection with the planned Merger.

Full 10-K form ▸

1066138--3/16/2010--LODGIAN_INC