What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-07 · 128 added, 109 removed, 643 unchanged (27% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net operating revenues:

10 unchanged sentences

Selling, general and administrative expenses

Operating income (loss)

Operating income

Other income (expense):

15 unchanged sentences

(in thousands, except per share amounts)

September 30,

Current Assets:

Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts of $271 at June 30, 2020 and $275 at December 31, 2019

Accounts receivable, less allowance for doubtful accounts of $276 at September 30, 2020 and $275 at December 31, 2019

Unbilled membership dues receivable

36 unchanged sentences

(in thousands , except for share data )

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

Non-controlling

Shareholders'

Balance at April 1, 2020

Balance at July 1, 2020

Stock options - compensation costs

Balance at June 30, 2020

For the Three Months Ended June 30, 2019

Net income (loss)

Balance at September 30, 2020

For the Three Months Ended September 30, 2019

Non-controlling

Shareholders'

Balance at April 1, 2019

Balance at July 1, 2019

Stock options - compensation costs

Net income (loss)

Balance at June 30, 2019

Balance at September 30, 2019

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands , except for share data )

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

Non-controlling

2 unchanged sentences

Stock options - compensation costs

Balance at June 30, 2020

For the Six Months Ended June 30, 2019

Balance at September 30, 2020

For the Nine Months Ended September 30, 2019

Non-controlling

2 unchanged sentences

Stock options - compensation costs

Balance at June 30, 2019

Balance at September 30, 2019

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

26 unchanged sentences

Principal payments on term loan facilities

Borrowings under line of credit facility

Repayment under line of credit facility

16 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2020

September 30, 2020

Description of Business

12 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of June 30, 2020, and the results of its operations and cash flows for the interim periods presented.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of September 30, 2020, and the results of its operations and cash flows for the interim periods presented.

The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year.

The coronavirus/COVID-19 pandemic (collectively referred to herein as "COVID-19") has adversely impacted our financial position, results of operations, and cash flows for the first six months of 2020.

The unaudited Condensed Consolidated Financial Statements presented herein reflect our current estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods presented.

20 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.

Cash, cash equivalents and restricted cash consist of the following at June 30, 2020 and December 31, 2019 (in thousands):

Cash, cash equivalents and restricted cash consist of the following at September 30, 2020 and December 31, 2019 (in thousands):

September 30,

Cash and cash equivalents

21 unchanged sentences

Operations of the salt water injection wells have been suspended in accordance with the Chief of the Division of Oil and Gas Resources Management order (See Note 15).

Due to the suspension of the salt water injection wells, there were no operating revenues for the three and six months ended June 30, 2020 and 2019.

For both the three months ended June 30, 2020 and 2019, the net operating revenues related to waste management services represented approximately 70% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, the net operating revenues related to waste management services represented approximately 74% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s waste management services segment revenues.

Due to the suspension of the salt water injection wells, there were no operating revenues for the three and nine months ended September 30, 2020 and 2019.

For the three months ended September 30, 2020 and 2019, the net operating revenues related to waste management services represented approximately 56% and 64%, respectively, of Avalon’s total consolidated net operating revenues.

For the nine months ended September 30, 2020 and 2019, the net operating revenues related to waste management services represented approximately 67% and 70%, respectively, of Avalon’s total consolidated net operating revenues.

For both the nine months ended September 30, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s waste management services segment revenues.

For our waste management services contracts, the customer contracts with us to provide a series of distinct waste management services over time which integrates a set of tasks (i.e.

26 unchanged sentences

Due to adverse weather conditions, net operating revenues relating to the golf courses, which are located in northeast Ohio and Pennsylvania, were minimal during the first three months of 2020 and 2019.

For both the three months ended June 30, 2020 and 2019, the net operating revenues related to the golf and related operations represented approximately 30% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, the net operating revenues related to the golf and related operations represented approximately 26% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

For the three months ended September 30, 2020 and 2019, the net operating revenues related to the golf and related operations represented approximately 44% and 36%, respectively, of Avalon’s total consolidated net operating revenues.

For the nine months ended September 30, 2020 and 2019, the net operating revenues related to the golf and related operations represented approximately 33% and 30%, respectively, of Avalon’s total consolidated net operating revenues.

For both the nine months ended September 30, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

For Avalon’s golf and related operations, the Avalon Golf and Country Club offers membership packages for use of the country club facilities and its related amenities.

19 unchanged sentences

Amounts paid in advance, such as deposits on overnight lodging or for banquet or conferences facilities, are recorded as a liability until the goods or services are provided to the customer (see Contract Liabilities below).

The following table presents our net operating revenues disaggregated by revenue source for the three and six months ended June 30, 2020 and 2019 (in thousands).

The following table presents our net operating revenues disaggregated by revenue source for the three and nine months ended September 30, 2020 and 2019 (in thousands).

Sales and other taxes are excluded from revenues.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Waste management and brokerage services

12 unchanged sentences

The amounts due are stated at their net realizable value.

At June 30, 2020 and December 31, 2019, accounts receivable, net, related to our waste management services segment were approximately $6.1 million and $11.0 million, respectively.

No one customer of the waste management services segment accounted for 10% or more of Avalon’s waste management services segment or consolidated net receivables at June 30, 2020.

At September 30, 2020 and December 31, 2019, accounts receivable, net, related to our waste management services segment were approximately $7.4 million and $11.0 million, respectively.

At September 30, 2020, one customer of the waste management services segment accounted for 12% of Avalon’s waste management services segment’s receivables and 10% of the consolidated receivables.

At December 31, 2019 one customer accounted for approximately 14% of the waste management services segment’s receivables and 13% of the consolidated receivables.

Accounts receivable, net, related to our golf and related operations segment were approximately $1.7 million at June 30, 2020 and $1.0 million at December 31, 2019.

No one customer of the golf and related operations segment accounted for 10% or more of Avalon’s golf and related operations segment or consolidated net receivables at June 30, 2020 or December 31, 2019.

Accounts receivable, net, related to our golf and related operations segment were approximately $1.3 million at September 30, 2020 and $1.0 million at December 31, 2019.

No one customer of the golf and related operations segment accounted for 10% or more of Avalon’s golf and related operations segment or consolidated net receivables at September 30, 2020 or December 31, 2019.

The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected.

3 unchanged sentences

Payments subsequently received on such receivables are credited to the allowance for doubtful accounts, or to income, as appropriate under the circumstances.

Allowance for doubtful accounts was approximately $0.3 million at both June 30, 2020 and December 31, 2019.

Allowance for doubtful accounts was approximately $0.3 million at both September 30, 2020 and December 31, 2019.

On January 1, 2020, the Company adopted the guidance under ASU 2016-13.

1 unchanged sentence

The adoption, which was applied on a modified retrospective basis, did not have an impact on the Company's financial condition and results of operations and therefore did not result in an adjustment to retained earnings as of January 1, 2020.

The following table presents changes in our allowance for doubtful accounts during the three and six months ended June 30, 2020 and 2019 (in thousands):

The following table presents changes in our allowance for doubtful accounts during the three and nine months ended September 30, 2020 and 2019 (in thousands):

Beginning of Period

1 unchanged sentence

Allowance for doubtful accounts

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Contract Assets

2 unchanged sentences

Contract assets related to unbilled membership dues are classified as current as revenue related to such agreements is recognized within the annual membership period.

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $1.1 million at June 30, 2020 and $0.6 million at December 31, 2019.

The following table presents changes in our contract assets during the three and six months ended June 30, 2020 and 2019 (in thousands):

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $0.9 million at September 30, 2020 and $0.6 million at December 31, 2019.

The following table presents changes in our contract assets during the three and nine months ended September 30, 2020 and 2019 (in thousands):

Beginning of Period

2 unchanged sentences

Unbilled membership dues receivable

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Contract Liabilities

2 unchanged sentences

We classify deferred membership dues revenue as current based on the timing of when we expect to recognize revenue for the membership commitment based on the Company satisfying the stand ready performance obligation throughout the annual membership period.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019 were $4.8 million and $3.2 million, respectively.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019 were $4.0 million and $3.2 million, respectively.

Customer advance deposits are recorded as a liability until the goods or services are provided to the customer.

1 unchanged sentence

The unrecognized revenues related to customer advance deposits are recorded in “Other liabilities and accrued expenses” in our Condensed Consolidated Balance Sheets.

Customer advance deposits were approximately $0.7 million at June 30, 2020 and $0.6 million at December 31, 2019.

The following table presents changes in our contract liabilities during the three and six months ended June 30, 2020 and 2019 (in thousands):

Customer advance deposits were approximately $0.6 million at both September 30, 2020 and December 31, 2019.

The following table presents changes in our contract liabilities during the three and nine months ended September 30, 2020 and 2019 (in thousands):

Beginning of Period

2 unchanged sentences

Deferred membership dues revenue

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Customer advance deposits

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Property and Equipment

6 unchanged sentences

Interest costs are capitalized on significant construction projects.

Property and equipment at June 30, 2020 and December 31, 2019 consists of the following (in thousands):

Property and equipment at September 30, 2020 and December 31, 2019 consists of the following (in thousands):

September 30,

Land and land improvements

5 unchanged sentences

Property and equipment, net

At June 30, 2020, the Company did not have any significant fixed contractual commitments for construction projects.

At September 30, 2020, the Company did not have any significant fixed contractual commitments for construction projects.

Avalon reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

3 unchanged sentences

or if quoted market prices are not available, Avalon would discount the expected estimated future cash flows.

During the first six months of 2020 and 2019, no triggering events were present.

During the first nine months of 2020 and 2019, no triggering events were present.

Operating Leases

2 unchanged sentences

Our operating leases have remaining lease terms ranging from 1 to 5 years.

The weighted average remaining lease term on operating leases was approximately 3.1 years at June 30, 2020.

The weighted average remaining lease term on operating leases was approximately 2.7 years at September 30, 2020.

In connection with the purchase of New Castle Country Club’s real property assets on May 13, 2019, the Company assumed the remaining term of New Castle Country Club’s golf cart operating lease.

3 unchanged sentences

The Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately $194,000.

During the first six months of 2020, the Company entered into a new operating lease agreement for hotel furniture.

During the first nine months of 2020, the Company entered into a new operating lease agreement for hotel furniture.

The Company recorded an operating lease right-of-use asset and corresponding obligation under the operating lease of approximately $266,000.

Leased property and associated obligations under operating leases at June 30, 2020 and December 31, 2019 consists of the following (in thousands):

Leased property and associated obligations under operating leases at September 30, 2020 and December 31, 2019 consists of the following (in thousands):

September 30,

Operating lease right-of-use assets

2 unchanged sentences

Total obligations under operating leases

The weighted average discount rate on operating leases was 4.96% at June 30, 2020 and 5.01% at December 31, 2019.

The weighted average discount rate on operating leases was 4.96% at September 30, 2020 and 5.01% at December 31, 2019.

Finance Leases

4 unchanged sentences

Based upon the amount of leasehold improvements already made, Avalon expects to exercise all its remaining renewal options.

At June 30, 2020 there were approximately 33.3 years remaining on the golf course and related facilities finance lease.

At September 30, 2020 there were approximately 33.1 years remaining on the golf course and related facilities finance lease.

In addition, the golf and related operations also entered into lease agreements for vehicles, golf course maintenance and restaurant equipment and the captive landfill operations entered into lease agreements for equipment which were determined to be finance leases.

At June 30, 2020, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from 1 to 5 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.2 years at June 30, 2020.

Leased property and associated obligations under finance leases at June 30, 2020 and December 31, 2019 consists of the following (in thousands):

At September 30, 2020, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from 1 to 5 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.1 years at September 30, 2020.

Leased property and associated obligations under finance leases at September 30, 2020 and December 31, 2019 consists of the following (in thousands):

September 30,

Leased property under finance leases

4 unchanged sentences

Total obligations under finance leases

The weighted average discount rate on finance leases was 4.7% at June 30, 2020 and 5.2% at December 31, 2019.

For the three and six months ended June 30, 2020 and 2019, components of lease expense were as follows (in thousands):

The weighted average discount rate on finance leases was 4.7% at September 30, 2020 and 5.2% at December 31, 2019.

For the three and nine months ended September 30, 2020 and 2019, components of lease expense were as follows (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating lease cost:

4 unchanged sentences

Total finance lease cost

Future commitments under long-term, operating and finance leases at June 30, 2020 are as follows (in thousands):

Future commitments under long-term, operating and finance leases at September 30, 2020 are as follows (in thousands):

Total lease payments

4 unchanged sentences

Basic net loss per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing the net loss by the weighted average number of common shares outstanding.

For both the three and six months ended June 30, 2020 and 2019, the weighted average number of common shares outstanding was 3,875,431.

For both the three and nine months ended September 30, 2020 and 2019, the weighted average number of common shares outstanding was 3,875,431.

Diluted net income (loss) per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus any weighted common equivalent shares determined to be outstanding during the period using the treasury method.

The weighted common equivalent shares included in the calculation are related to stock options granted by Avalon where the weighted average market price of Avalon’s common stock for the period presented is greater than the option exercise price of the stock option.

For both the three and six months ended June 30, 2020, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

For the three months ended September 30, 2020, the diluted per share amount reported is equal to the basic per share amount because the average market price of Avalon’s common shares during the period was less than the exercise price of the stock options outstanding.

For the nine months ended September 30, 2020, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Assuming dilution, the diluted per share amount is equal to the basic per share amount because the average market price of Avalon’s common shares during the period was less than the exercise price of the stock options outstanding.

For the three months ended June 30, 2019, the diluted weighted average number of shares outstanding was 3,893,956.

For the six months ended June 30, 2019, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Assuming dilution, the weighted average number of common shares outstanding for the six months ended June 30, 2019 was 3,918,225.

For the three months ended September 30, 2019, the diluted weighted average number of shares outstanding was 3,892,948.

For the nine months ended September 30, 2019, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Assuming dilution, the weighted average number of common shares outstanding for the nine months ended September 30, 2019 was 3,909,706.

Term Loan s and Line of Credit Agreements

5 unchanged sentences

The remaining proceeds of approximately $7.2 million were deposited into a project fund account.

At June 30, 2020 and December 31, 2019, loan proceeds of $4.9 million and $7.2 million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.”

At September 30, 2020 and December 31, 2019, loan proceeds of $4.2 million and $7.2 million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.”

The 2016 Term Loan Agreement, 2019 Term Loan Agreement and the Commercial Mortgage Agreement were terminated in conjunction with the New Term Loan Agreement.

9 unchanged sentences

The New Term Loan also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the New Term Loan Agreement covenants at June 30, 2020 and December 31, 2019.

Avalon was in compliance with the New Term Loan Agreement covenants at September 30, 2020 and December 31, 2019.

The Company capitalized approximately $0.4 million of debt issuance costs in connection with the New Term Loan Agreement.

6 unchanged sentences

At December 20, 2019, the outstanding balance of $1.7 million under the Line of Credit Agreement was paid down with a portion of the proceeds from the New Term Loan Agreement.

No amounts were drawn under the Line of Credit Agreement at June 30, 2020 and December 31, 2019.

No amounts were drawn under the Line of Credit Agreement at September 30, 2020 and December 31, 2019.

Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25%.

At June 30, 2020, the interest rate on the Line of Credit Agreement was 3.50%.

At September 30, 2020, the interest rate on the Line of Credit Agreement was 3.50%.

Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment.

1 unchanged sentence

The Line of Credit Agreement also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the Line of Credit Agreements covenants at June 30, 2020 and December 31, 2019.

Avalon was in compliance with the Line of Credit Agreements covenants at September 30, 2020 and December 31, 2019.

Paycheck Protection Program Loan

10 unchanged sentences

In the second quarter of 2020, certain wholly-owned subsidiaries of Avalon entered into agreements and received a total of approximately $2.8 million in loans under the Program.

The Company is currently utilizing the loan proceeds under the 24 week loan forgiveness period in accordance with Program’s guidelines.

The Company utilized the loan proceeds under the 24 week loan forgiveness period and subsequently applied for forgiveness in accordance with the Program’s guidelines.

The Company is accounting for the loans in accordance with Accounting Standards Codification (“ASC”) 470 – Debt .

2 unchanged sentences

When the debt is forgiven in accordance with the Program, any amount that is forgiven will be recognized in the Condensed Consolidated Statements of Operations as a gain on debt extinguishment.

The Company will repay amounts that are not forgiven or utilized.

During the three months ended June 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.67% and 5.53%, respectively.

During the six months ended June 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.82% and 5.45%, respectively.

Obligations under the Company’s debt agreements at June 30, 2020 and December 31, 2019 consist of the following (in thousands):

June 30, 2020

The Company will repay amounts that are not forgiven.

During the three months ended September 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.57% and 5.53%, respectively.

During the nine months ended September 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.74% and 5.48%, respectively.

Obligations under the Company’s debt agreements at September 30, 2020 and December 31, 2019 consist of the following (in thousands):

September 30, 2020

Debt Issuance Costs

8 unchanged sentences

Long-term debt

At June 30, 2020, future maturities of long-term debt are as follows (in thousands):

During the three month period ended June 30, 2020, net loss attributable to Avalon Holdings Corporation shareholders was $0.4 million compared to net income attributable to Avalon Common shareholders of $0.5 million for the three month period ended June 30, 2019.

During the six month periods ended June 30, 2020 and 2019, net loss attributable to Avalon Holdings Corporation shareholders was $1.2 million and $0.2 million, respectively.

Avalon recorded a state income tax provision in both the three and six month periods ended June 30, 2020 and 2019, which was related entirely to the waste management and brokerage operations.

At September 30, 2020, future maturities of long-term debt are as follows (in thousands):

During the three months ended September 30, 2020 and 2019, net income attributable to Avalon Holdings Corporation shareholders was $0.8 million and $0.1 million, respectively.

During the nine months ended September 30, 2020 and 2019, net loss attributable to Avalon Holdings Corporation shareholders was $0.5 million and less than $0.1 million, respectively.

Avalon recorded a state income tax provision in both the three and nine month periods ended September 30, 2020 and 2019, which was related entirely to the waste management and brokerage operations.

Due to the recording of a full valuation allowance against the Company’s federal net deferred tax assets, the overall effective tax rate in both periods reflects taxes owed in certain U.S state jurisdictions.

16 unchanged sentences

The purpose of the Avalon Holdings Corporation 2019 Long-term Incentive Plan (the “Plan”) is (a) to improve individual employee performance by providing long-term incentives and rewards to employees of Avalon, (b) to assist Avalon in attracting, retaining and motivating employees and non-employee directors with experience and ability, and (c) to associate the interests of such employees and directors with those of the Avalon shareholders.

At June 30, 2020, options to purchase 280,000 shares have been granted under the 2009 Plan.

At September 30, 2020, options to purchase 280,000 shares have been granted under the 2009 Plan.

Of these, 12,000 shares have been exercised, and options for 268,000 shares remain outstanding.

30 unchanged sentences

Options cancelled or forfeited

Outstanding at June 30, 2020

Outstanding at September 30, 2020

Options Vested

Exercisable at June 30, 2020

Exercisable at September 30, 2020

The stock options vest and become exercisable based upon achieving two critical metrics as follows:

15 unchanged sentences

96 months after Grant Dates

Compensation costs were approximately $2,000 for both the three months ended June 30, 2020 and 2019, and $3,000 for both the six months ended June 30, 2020 and 2019, based upon the estimated grant date fair value calculations.

As of June 30, 2020, there was approximately $15,000 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan.

Compensation costs were approximately $1,000 for both the three months ended September 30, 2020 and 2019, and $4,000 for both the nine months ended September 30, 2020 and 2019, based upon the estimated grant date fair value calculations.

As of September 30, 2020, there was approximately $14,000 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan.

That cost is expected to be recognized over a weighted-average period of 3.67 years.

11 unchanged sentences

Avalon does not have significant operations located outside the United States and, accordingly, geographical segment information is not presented.

For both the six months ended June 30, 2020 and 2019, no one customer accounted for 10% of Avalon’s consolidated or reportable segment net operating revenues.

For both the nine months ended September 30, 2020 and 2019, no one customer accounted for 10% of Avalon’s consolidated or reportable segment net operating revenues.

The accounting policies of the segments are consistent with those described for the consolidated financial statements in the summary of significant accounting policies included in Avalon’s 2019 Annual Report to Shareholders.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net operating revenues from:

10 unchanged sentences

Total net operating revenues

Three Months Ended

Six Months Ended

Income (loss) before income taxes:

6 unchanged sentences

Income (loss) before income taxes

September 30,

Identifiable assets:

2 unchanged sentences

Elimination of intersegment receivables

In comparing the total assets at June 30, 2020 with those at December 31, 2019, the decrease in the total assets of the waste management services segment of $3.1 million is primarily a result of a decrease in accounts receivable partially offset by an increase in intersegment transactions, which are eliminated in consolidation.

In comparing the total assets at September 30, 2020 with those at December 31, 2019, the decrease in the total assets of the waste management services segment of $1.8 million is primarily a result of a decrease in accounts receivable partially offset by an increase in intersegment transactions, which are eliminated in consolidation.

The increase in total assets of the golf and related operations segment of $2.3 million was primarily due to an increase in accounts receivable and capital expenditures related to the expansion of The Grand Resort partially offset by current year depreciation on property and equipment.

The increase in corporate total assets of approximately $2.8 million is primarily due to an increase in cash and cash equivalents and intersegment transactions, which are eliminated in consolidation, partially offset by a decrease in restricted cash utilized for the expansion of The Grand Resort.

The increase in corporate total assets of approximately $1.1 million is primarily due to an increase in operating cash and cash equivalents and intersegment transactions, which are eliminated in consolidation, partially offset by a decrease in restricted cash utilized for the expansion of The Grand Resort.

Certain Relationships and Related Transactions

7 unchanged sentences

As a result of a private placement offering, Avalon is not the majority owner of AWMS Holdings, LLC.

At June 30, 2020 and December 31, 2019, respectively, Avalon owns approximately 47% of AWMS Holdings, LLC.

At September 30, 2020 and December 31, 2019, respectively, Avalon owns approximately 47% of AWMS Holdings, LLC.

In accordance with ASC 810-10 and related amendment , due to the managerial control of American Water Solutions, LLC, AWMS Holdings, LLC is a variable interest entity, and the financial statements of AWMS Holdings, LLC and subsidiaries are included in Avalon’s consolidated financial statements.

23 unchanged sentences

On September 12, 2018, the Company appealed the Ohio 10 th District Court of Appeals decision to the Supreme Court of Ohio.

On November 21, 2018, Avalon, received notice from the Supreme Court of Ohio that the court would not accept for review the Company’s appeal of the Ohio 10 th District Court of Appeals decision on the Division of Oil and Gas Resources Management’s appeal of the Franklin County Court of Common Pleas February 21, 2017 entry allowing restart of the Company’s AWMS Water Solutions, LLC #2 salt water injection well.

On November 21, 2018, the Company received notice from the Supreme Court of Ohio that the court would not accept for review the Company’s appeal of the Ohio 10 th District Court of Appeals decision on the Division of Oil and Gas Resources Management’s appeal of the Franklin County Court of Common Pleas February 21, 2017 entry allowing restart of the Company’s AWMS Water Solutions, LLC #2 salt water injection well.

On April 5, 2019, Avalon filed with the Oil and Gas Commission a motion to vacate its prior decisions in this matter.

8 unchanged sentences

Concurrently with the filing of the appeal with the Franklin County Court of Common Pleas, the Company filed a writ of mandamus in the 10 th District Court of Appeals on August 30, 2019 to compel the chief of the Division to issue restart orders, or alternative orders that would allow the Company to either restart the AWMS #2 well, or appeal said orders to the Oil and Gas Commission in accordance with Ohio Law.

On October 6, 2020 and in response to a motion from the Division, the Court dismissed this complaint for writ of mandamus.

In addition, on August 26, 2016, Avalon filed a complaint in the 11 th Appellate District Court in Trumbull County, Ohio for a Peremptory Writ of Mandamus to compel the Director of the ODNR to initiate appropriations procedures to determine damages from the illegal regulatory taking of the Company’s property, or issue an alternative remedy at law.

6 unchanged sentences

Oral arguments in the case occurred on April 7, 2020.

The Company is currently awaiting judgment from the Supreme Court of Ohio.

On September 23, 2020, the Supreme Court of Ohio ruled in favor of the Company.

The Supreme Court of Ohio reversed the decision of the 11 th Appellate District Court and remanded back to that court for a trial on the merits.

The Company is currently preparing for that trial.

Asset Acquisition

54 unchanged sentences

The Company’s dining rooms, fitness, athletic, pool, salon and spa services reopened under certain mandatory restrictions including mask protection for employees, decrease in occupancy and other measures to enforce social distancing.

The continued spread of COVID-19 and related governmental orders adversely impacted our operations and related financial results.

Our restaurant operations generated significantly lower revenue as a result of the government mandated restrictions that were placed on in-house dining.

Food and beverages sales related to banquets and conferences were minimal during the second quarter of 2020 as a result of government mandated restrictions placed on gatherings and events.

In addition, the Company had high levels of room and event cancellations with some re-bookings in the third and fourth quarter of 2020 and into 2021.

Our fitness, athletics, salon and spa operations generated no revenue under the mandate.

During 2020, the governmental orders issued to control the spread of COVID-19 adversely impacted our operations and related financial results.

During the Stay at Home order, our restaurant operations generated significantly lower revenue as a result of the restrictions that were placed on in-house dining.

Our restaurant revenue increased during the third quarter of 2020 as certain restrictions on in-house dining were reduced or lifted.

Food and beverages sales related to banquets and conferences were significantly lower during the second and third quarter of 2020 as a result of restrictions placed on gatherings and events.

In addition, the Company had high levels of room and event cancellations during the Stay at Home Order with some subsequent re-bookings that occurred in the third quarter of 2020 and into the fourth quarter of 2020 and into 2021.

Our fitness, athletics, salon and spa operations generated no revenue under the Stay at Home Order.

In addition, our waste management brokerage business has experienced a decline in both continuous and project work due to government restrictions placed on its customers and associated shutdowns.

As government restrictions are reduced or lifted, we may experience weakened demand in light of continued travel restrictions or warnings, consumer fears and reduced consumer discretionary spending and general economic uncertainty.

As government restrictions are reduced or lifted, we may continue to experience weakened demand in light of continued travel restrictions or warnings, consumer fears and reduced consumer discretionary spending and general economic uncertainty.

In light of the foregoing, we are unable to determine when our operations will return to pre-pandemic demand or pricing.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements