What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-12 · 524 added, 262 removed, 509 unchanged (61% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Net operating revenues:

10 unchanged sentences

Selling, general and administrative expenses

Operating income

Operating loss

Other income (expense):

Interest expense

Gain on debt extinguishment

Other income, net

13 unchanged sentences

(in thousands, except per share amounts)

September 30,

Current Assets:

Cash and cash equivalents

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

Accounts receivable, less allowance for credit losses

Unbilled membership dues receivable

36 unchanged sentences

(in thousands, except for share data)

For the Three Months Ended September 30, 2020

Non-controlling

Shareholders'

Balance at July 1, 2020

Stock options - compensation costs

Net income (loss)

Balance at September 30, 2020

For the Three Months Ended September 30, 2019

Non-controlling

Shareholders'

Balance at July 1, 2019

Stock options - compensation costs

Net income (loss)

Balance at September 30, 2019

See accompanying notes to unaudited condensed consolidated financial statements.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

(in thousands , except for share data )

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Non-controlling

2 unchanged sentences

Stock options - compensation costs

Balance at September 30, 2020

For the Nine Months Ended September 30, 2019

Net income (loss)

Balance at March 31, 2021

For the Three Months Ended March 31, 2020

Non-controlling

2 unchanged sentences

Stock options - compensation costs

Balance at September 30, 2019

Net income (loss)

Balance at March 31, 2020

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Reconciliation of net loss to cash provided by operating activities:

Net income (loss)

Reconciliation of net income (loss) to cash provided by (used in) operating activities:

Depreciation and amortization expense

3 unchanged sentences

(Gain) loss from disposal of equipment

Change in operating assets and liabilities, net of effect of acquisition

Gain on debt extinguishment

Change in operating assets and liabilities:

Accounts receivable

1 unchanged sentence

Prepaid expenses

Other assets, net

Accounts payable

4 unchanged sentences

Other liabilities and accrued expenses

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Capital expenditures

Payments related to acquisition of New Castle Country Club

Proceeds from disposal of vehicle

1 unchanged sentence

Cash flows from financing activities:

Proceeds under term loan facility

Proceeds under Paycheck Protection Program

Payments of debt issuance costs

Principal payments on term loan facilities

Borrowings under line of credit facility

Repayment under line of credit facility

Principal payments on finance lease obligations

Net cash provided by financing activities

Increase in cash, cash equivalents and restricted cash

Net cash used in financing activities

Decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

3 unchanged sentences

Capital expenditures included in accounts payable

Significant non-cash operating and financing activities:

Interest forgiven from Paycheck Protection Program loans

Significant non-cash investing and financing activities:

1 unchanged sentence

Finance lease obligations incurred

Acquisition of New Castle Country Club real property in exchange for assumption of outstanding debt

Cash paid during the period for interest

3 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2020

March 31, 2021

Description of Business

5 unchanged sentences

(“ARCI”), which includes the operation and management of four golf courses and associated clubhouses, athletic and fitness centers, tennis courts, salon and spa services, dining and banquet facilities and a travel agency.

ARCI also owns and operates a hotel and its related resort amenities including dining, banquet and conference facilities, fitness center, outdoor resort pool, Roman Bath, indoor junior Olympic size swimming pool and tennis courts.

ARCI also owns and operates a hotel and its related resort amenities including dining, banquet and conference facilities, salon and spa services, fitness center, outdoor resort pool, Roman Bath, indoor junior Olympic size swimming pool and tennis courts.

Basis of Presentation

4 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 September 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 March 31, 2021, 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 nine 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.

The coronavirus/COVID-19 pandemic (collectively referred to herein as "COVID-19") adversely impacted our financial position, results of operations, and cash flows during both the three months ended March 31, 2021 and 2020.

The 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.

Due to the ongoing uncertainty, we cannot predict the future impact that COVID-19 may have on our financial condition, results of operations or cash flows.

COVID-19 Coronavirus Pandemic

In December 2019, a novel strain of coronavirus, COVID-19, emerged in Wuhan, Hubei Province, China.

While initially concentrated in China, the outbreak spread to other countries and infections have been reported globally including in the United States.

On March 11, 2020, the World Health Organization declared the COVID-19 viral disease a pandemic.

As a result, the federal and state governmental bodies have taken unprecedented measures to try and control the spread of the virus including the issuance of temporary stay at home orders, the temporary closing of non-essential businesses and in-house dining and restrictions on gatherings and events.

The duration of the outbreak still remains unclear.

During both the three months ended March 31, 2021 and 2020, the various governmental orders issued to control the spread of COVID-19 adversely impacted our operations and related financial results.

Our restaurant operations have government mandated occupancy restrictions for in-house dining.

Food and beverages sales related to banquets and conferences were significantly lower as a result of restrictions placed on gatherings and events.

In addition, in March 2020, the Company began experiencing a high level of room and event cancellations with some subsequent re-bookings for a future date.

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.

The Company engaged in efforts to reduce expenses, including reducing employee costs, through hiring freezes, headcount reductions and furloughs of employees.

The Company subsequently rehired employees and utilized the proceeds obtained from the Paycheck Protection Program Loans as the government restrictions on certain business operations were reduced or lifted.

Governmental bodies may continue to impose additional restrictions, which could include additional shutdowns, to stop the spread of infection.

These additional restrictions would have a negative impact on our financial condition, results of operations and cash flows.

Recent Accounting Pronouncements

Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”).

The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement as either rental expense for operating leases and depreciation and interest expense for finance leases.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

On January 1, 2019, the Company adopted ASU 2016-02 under the modified retrospective method with the available practical expedients.

As a result of adoption, on January 1, 2019, the Company recorded a ROU asset and related lease liability of approximately $1.7 million for its existing golf carts, machinery and equipment for the landfill operations, furniture and fixtures for The Grand Resort and office copiers under operating leases (See Note 7).

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which introduced an approach to estimate credit losses on certain types of financial instruments, including trade receivables, based on expected losses.

ASU 2016-13, which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, required companies to make a cumulative-effect adjustment to retained earnings as of January 1, 2020.

The Company adopted ASU 2016-13 effective January 1, 2020.

The adoption of ASU 2016-13 did not have an impact on the Company’s financial position or results of operations (See Note 5).

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU 2020-04”) establishing Accounting Standards Codification (“ASC”) Topic 848, Reference Rate Reform.

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

The Company is currently evaluating the impact of the guidance and our options related to the practical expedients.

Cash, Cash Equivalents and Restricted Cash

6 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 September 30, 2020 and December 31, 2019 (in thousands):

September 30,

Cash, cash equivalents and restricted cash consist of the following at March 31, 2021 and December 31, 2020 (in thousands):

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 16).

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.

Due to the suspension of the salt water injection wells, there were no operating revenues for the three months ended March 31, 2021 and 2020.

For the three months ended March 31, 2021 and 2020, the net operating revenues related to waste management services represented approximately 74% and 77%, respectively, of Avalon’s total consolidated net operating revenues.

For the three months ended March 31, 2021, one customer accounted for 20% of the waste management services segment’s net operating revenues to external customers and 15% of the consolidated net operating revenues.

For the three months ended March 31, 2020, 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 2021 and 2020.

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 the three months ended March 31, 2021 and 2020, the net operating revenues related to the golf and related operations represented approximately 26% and 23%, respectively, of Avalon’s total consolidated net operating revenues.

For both the three months ended March 31, 2021 and 2020, 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 nine months ended September 30, 2020 and 2019 (in thousands).

The following table presents our net operating revenues disaggregated by revenue source for the three months ended March 31, 2021 and 2020 (in thousands).

Sales and other taxes are excluded from revenues.

Three Months Ended

Nine Months Ended

September 30,

Waste management and brokerage services

5 unchanged sentences

Greens fees and cart rental revenue

Tennis lesson revenue

Other revenue

5 unchanged sentences

The amounts due are stated at their net realizable value.

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 $1.3 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.

At March 31, 2021 and December 31, 2020, accounts receivable, net, related to our waste management services segment were approximately $8.8 million and $7.9 million, respectively.

At March 31, 2021, one customer accounted for approximately 25% of the waste management services segment’s receivables and 20% of the consolidated receivables.

At December 31, 2020 no one customer accounted for 10% or more of Avalon’s waste management services segment or consolidated net receivables.

Accounts receivable, net, related to our golf and related operations segment were approximately $1.9 million and $0.8 million at March 31, 2021 and December 31, 2020, respectively.

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 March 31, 2021 or December 31, 2020.

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

Customer accounts that are outstanding longer than the contractual payment terms are considered past due.

1 unchanged sentence

Avalon writes off accounts receivable when they become uncollectible.

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 September 30, 2020 and December 31, 2019.

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

ASU 2016-13 introduced a methodology for measuring estimated credit losses on certain types of financial instruments, including trade receivables, based on expected losses and the timing of when such losses are recorded.

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 nine months ended September 30, 2020 and 2019 (in thousands):

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

Allowance for credit losses was approximately $0.3 million at March 31, 2021 and December 31, 2020.

The following table presents changes in our allowance for credit losses during the three months ended March 31, 2021 and 2020 (in thousands):

Beginning of Period

End of Period

Allowance for doubtful accounts

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Allowance for credit losses

Three months ended March 31, 2021

Three months ended March 31, 2020

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 $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):

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $0.7 million at March 31, 2021 and $0.6 million at December 31, 2020.

The following table presents changes in our contract assets during the three months ended March 31, 2021 and 2020 (in thousands):

Beginning of Period

2 unchanged sentences

Unbilled membership dues receivable

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Three months ended March 31, 2021

Three months ended March 31, 2020

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 September 30, 2020 and December 31, 2019 were $4.0 million and $3.2 million, respectively.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets were approximately $4.1 million at March 31, 2021 and $3.2 million at December 31, 2020, 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 $0.6 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):

Customer advance deposits were approximately $0.8 million at March 31, 2021 and $0.7 million at December 31, 2020.

The following table presents changes in our contract liabilities during the three months ended March 31, 2021 and 2020 (in thousands):

Beginning of Period

2 unchanged sentences

Deferred membership dues revenue

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Three months ended March 31, 2021

Three months ended March 31, 2020

Customer advance deposits

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Three months ended March 31, 2021

Three months ended March 31, 2020

Property and Equipment

4 unchanged sentences

The cost of assets retired or otherwise disposed of and the related accumulated depreciation is eliminated from the accounts in the year of disposal.

Gains or losses resulting from disposals of property and equipment are credited or charged to operations.

Interest costs are capitalized on significant construction projects.

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

September 30,

Gains or losses resulting from the disposal of property and equipment are recorded in “Other income, net” in our Condensed Consolidated Statements of Operations.

Property and equipment at March 31, 2021 and December 31, 2020 consists of the following (in thousands):

Land and land improvements

5 unchanged sentences

Property and equipment, net

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

At March 31, 2021, 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 nine months of 2020 and 2019, no triggering events were present.

During the first three months of 2021 and 2020, no triggering events were present.

Operating Leases

Avalon leases golf carts, machinery and equipment for the landfill operations, furniture and fixtures for The Grand Resort and office copiers under operating leases.

On January 1, 2019, as a result of the adopted ASU 2016-02, the Company recorded a ROU asset and related lease liability of approximately $1.7 million.

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

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.

At acquisition, the Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately $126,000.

The golf cart operating lease had a remaining lease term of 3 years at the acquisition date (See Note 16).

In addition, subsequent to the purchase, the Company entered into new operating lease agreements for golf and maintenance carts.

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

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

The weighted average remaining lease term on operating leases was approximately 3.7 years at March 31, 2021.

During the first three months of 2021, the Company entered into a new operating lease agreement for golf cart GPS equipment.

The Company recorded an operating lease right-of-use asset and corresponding obligation under the operating lease of approximately $37,000.

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

September 30,

Leased property and associated obligations under operating leases at March 31, 2021 and December 31, 2020 consists of the following (in thousands):

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 September 30, 2020 and 5.01% at December 31, 2019.

The weighted average discount rate on operating leases was 4.7% at March 31, 2021 and December 31, 2020.

Finance Leases

4 unchanged sentences

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

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

At March 31, 2021 there were approximately 32.6 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 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,

At March 31, 2021, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from 1 to 4.3 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 2.8 years at March 31, 2021.

Leased property and associated obligations under finance leases at March 31, 2021 and December 31, 2020 consists of the following (in thousands):

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 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):

The weighted average discount rate on finance leases was 4.7% at March 31, 2021 and 4.5% at December 31, 2020.

For the three months ended March 31, 2021 and 2020, components of lease expense were as follows (in thousands):

Three 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 September 30, 2020 are as follows (in thousands):

Future commitments under long-term, operating and finance leases at March 31, 2021 are as follows (in thousands):

Total lease payments

2 unchanged sentences

Long-term portion of obligations under leases

Basic and Diluted Net Income ( Loss ) p er Share

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

Basic and Diluted Net Income (Loss) per Share

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

For the three months ended March 31, 2021 and 2020, the weighted average number of common shares outstanding was 3,899,431 and 3,875,431, respectively.

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 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 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

For the three months ended March 31, 2021, the diluted weighted average number of shares outstanding was 3,944,825.

For the three months ended March 31, 2020, 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.

Term Loans and Line of Credit Agreements

New Term Loan Agreement

On December 20, 2019, Avalon and certain direct and indirect wholly owned subsidiaries entered into a loan and security agreement (the “New Term Loan Agreement”) with Laurel Capital Corporation which provided for a $23.0 million term loan.

The New Term Loan Agreement proceeds were utilized to pay off and refinance the Company’s existing term loan and commercial mortgage agreements, pay down the outstanding balance and associated interest on the Company’s line of credit agreement and pay related transaction costs.

The remaining proceeds were deposited into a project fund account for which those proceeds are required to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At closing, $10.3 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated December 20, 2016 (“2016 Term Loan Agreement”), $2.9 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated March 29, 2019 (“2019 Term Loan Agreement”), $1.7 million of the proceeds were used to pay down the outstanding balance and associated interest on our existing line of credit agreement with Premier Bank (formerly Home Savings Bank), dated May 31, 2018, as amended, $0.6 million of the proceeds were used to pay off amounts outstanding under our commercial mortgage agreement with Mercer County State Bank, dated May 13, 2019 (“Commercial Mortgage”) and $0.3 million of the proceeds were utilized to pay transaction costs.

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

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.

The $23.0 million outstanding under the New Term Loan Agreement is payable in 119 equal monthly installments of principal and interest , based on a fifteen (15) year maturity schedule which commenced January 20, 2020 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of December 20, 2029.

At closing, $13.8 million of the proceeds were used to pay off and refinance amounts outstanding under our then existing term loan and commercial mortgage agreements, $1.7 million of the proceeds were used to pay down the outstanding balance and associated interest on our existing line of credit agreement and $0.3 million of the proceeds were utilized to pay related transaction costs.

The remaining proceeds of approximately $7.2 million were deposited into a project fund account for which those proceeds are required to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At March 31, 2021 and December 31, 2020, loan proceeds of $3.4 million and $3.9 million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.”

The then existing term loan and commercial mortgage agreements were terminated in conjunction with the New Term Loan Agreement.

The New Term Loan Agreement is payable in 119 equal monthly installments of principal and interest , based on a fifteen (15) year maturity schedule which commenced January 20, 2020 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of December 20, 2029.

Borrowings under the New Term Loan Agreement bear interest at a fixed rate of 5.00% until the fifth anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 5.00% per annum or (b) the sum of the five year treasury rate on the date two (2) business days prior to the reset date plus 3.60%, provided that the applicable rate shall in no event exceed 7.35% per annum.

5 unchanged sentences

Borrowings under the New Term Loan Agreement are secured by certain real property and related business assets as defined in the agreement.

The New Term Loan Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year commencing December 31, 2020.

The New Term Loan Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year.

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 September 30, 2020 and December 31, 2019.

Avalon was in compliance with the New Term Loan Agreement covenants at March 31, 2021 and December 31, 2020.

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

The Company will amortize these costs over the life of the New Term Loan Agreement.

The Company is amortizing these costs over the life of the New Term Loan Agreement.

In accordance with ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs , these costs are presented in the Condensed Consolidated Balance Sheets as a direct reduction from the carrying amount of the term loan liability.

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Under the Line of Credit Agreement, borrowings in excess of $1.0 million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement.

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 September 30, 2020 and December 31, 2019.

No amounts were drawn under the Line of Credit Agreement at March 31, 2021 and December 31, 2020.

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

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

At March 31, 2021, 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.

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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 September 30, 2020 and December 31, 2019.

Avalon was in compliance with the Line of Credit Agreements covenants at March 31, 2021 and December 31, 2020.

Paycheck Protection Program Loan

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The Program provides for 100% federally guaranteed loans to small businesses to allow employers to keep workers employed and maintain payroll during the pandemic and economic downturn.

Under the Program, qualified companies are eligible for a loan in an amount equal to the lesser of $10 million or 2.5x the business’s average monthly payroll.

Under the Program, qualified companies are eligible for a loan in an amount equal to the lesser of $10 million or 2.5 times the business’s average monthly payroll.

Collateral or guarantor support is not required for the loan.

Under the Program, the borrower is eligible for loan forgiveness up to the amount the borrower spends on certain eligible costs during the 8 week period beginning on the date the proceeds were received on the loan.

Under the Program, the borrower is eligible for loan forgiveness up to the amount the borrower spends on certain eligible costs during, at the borrowers election, either an 8 or 24 week covered period beginning on the date the proceeds were received on the loan.

Eligible costs under the Program include payroll costs, interest on mortgage obligations incurred before the covered period, rent on leasing agreements and utility services.

The amount of loan forgiveness is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.

Under the Program, proceeds that are not forgiven convert to a loan bearing interest at a fixed rate of 1% payable in 18 equal monthly installments commencing after the forgiveness period.

The Program was subsequently amended to allow the borrower to use an extended forgiveness period of 24 weeks beginning on the date the proceeds were received on the loan and to extend the repayment period to 54 months commencing after the 24 week forgiveness period.

Under the Program, proceeds that are not forgiven convert to a loan bearing interest at a fixed rate of 1% payable, at the borrowers election, in either 18 or 54 equal monthly installments commencing 10 months after the end of their covered period.

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 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 .

The Company utilized the entire balance of the loan proceeds in accordance with the Program’s guidelines using the 24 week loan forgiveness period and subsequently applied for forgiveness with the Small Business Administration.

The Company is accounting for the loans in accordance with ASC 470 – Debt .

Under ASC 470, the debt will be derecognized when the debt is extinguished in accordance with the guidance in ASC 405-20, Liabilities:

Extinguishments of Liabilities .

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.

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 forgiven in accordance with the Program is recognized in the Condensed Consolidated Statements of Operations as a gain on debt extinguishment.

During the fourth quarter of 2020, approximately $0.8 million of the loans and $4,000 of associated interest were forgiven by the Small Business Administration.

During the three months ended March 31, 2021, approximately $1.1 million of the loans and $8,000 of associated interest were forgiven by the Small Business Administration.

The Company anticipates the remaining loans, and associated interest, will be forgiven in the second or third quarter of 2021.

In the event that the Small Business Administration does not forgive any or a portion of the loan, the Company will repay amounts that are not forgiven using an 18 month repayment schedule with payments scheduled to commence in the third quarter of 2021.

During the three months ended March 31, 2021 and 2020, the weighted average interest rate on outstanding borrowings was 4.80% and 5.00%, respectively.

Obligations under the Company’s debt agreements at March 31, 2021 and December 31, 2020 consist of the following (in thousands):

March 31, 2021

Debt Issuance Costs

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Term Loan Agreement

Paycheck Protection Program Loans

Less current portion

Long-term debt

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.

At March 31, 2021, future maturities of long-term debt are as follows (in thousands):

During the three months ended March 31, 2021, net income attributable to Avalon Holdings Corporation shareholders was $0.7 million.

During the three months ended March 31, 2020, net loss attributable to Avalon Holdings Corporation shareholders was $0.8 million.

Avalon recorded a state income tax provision in the three month periods ended March 31, 2021 and 2020, 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.

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On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, permits NOL carryforwards generated in taxable years beginning after December 31, 2017, to offset 100% of taxable income for taxable years beginning before January 1, 2021, and 80% of taxable income in taxable years beginning after December 31, 2020.

The CARES Act, among other things, permits net operating loss carryforwards generated in taxable years beginning after December 31, 2017, to offset 100% of taxable income for taxable years beginning before January 1, 2021, and 80% of taxable income in taxable years beginning after December 31, 2020.

In addition, the CARES Act allows net operating losses incurred in taxable years beginning after December 31, 2017, and before January 1, 2021, to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company is currently evaluating the full impact of these provisions and recent IRS guidance, and we expect that it will not have a material impact on the Company’s financial position or results of operations.

Long-T erm Incentive Plan

On March 14, 2019, the Board of Directors of Avalon approved the renewal of the expired 2009 Long-term Incentive Plan (the “2009 Plan”), which is set to expire in October of 2019.

The adoption of these provisions did not have a material impact on the Company’s financial position or results of operations.

On December 27, 2020, the Consolidated Appropriations Act, 2021 (the “Appropriations Act”) was enacted in response to the COVID-19 pandemic.

The Appropriations Act, among other things, temporarily extends through December 31, 2025, certain expiring tax provisions, including look-through treatment of payments of dividends, interest, rents, and royalties received or accrued from related controlled foreign corporations.

Additionally, the Appropriations Act enacts new provisions and extends certain provisions originated within the CARES Act, including an extension of time for repayment of the deferred portion of employees’ payroll tax through December 31, 2021, and a temporary allowance for full deduction of certain business meals.

Avalon has elected not to defer the employees’ portion of payroll tax.

Management is currently evaluating the other provisions of the Appropriations Act, but at present time does not expect that the other provisions of the Appropriations Act would result in a material tax or cash benefit.

Long-Term Incentive Plan

On March 14, 2019, the Board of Directors of Avalon approved the renewal of the expired 2009 Long-term Incentive Plan (the “2009 Plan”), which was set to expire in October of 2019.

The 2009 Plan provides for the granting of options which are intended to be non-qualified stock options (“NQSO’s”) for federal income tax purposes except for those options designated as incentive stock options (“ISO’s”) which qualify under Section 422 of the Internal Revenue Code.

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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 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.

In March 2020, unexercised options to purchase 420,000 shares previously granted under the 2009 Plan expired as the options were not exercised within ten years after the grant date.

NQSO’s may be granted with an exercise price which is not less than 100% of the fair market value of the Class A Common Stock on the date of grant.

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If the Avalon common stock price does not reach the predetermined price, the stock options will either be cancelled or the period will be extended at the discretion of the Board of Directors.

In 2018, the Board of Directors extended the period of time for certain vested options that were not exercisable due to those options not meeting the predetermined stock price within the three years following the contractual vesting period.

The grant-date fair values of the stock option awards were estimated using the Monte Carlo Simulation.

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Treasury securities over a period consistent with the expected term.

In March 2021, unexercised options to purchase 190,000 shares previously granted under the 2009 Plan expired as the options were not exercised within ten years after the grant date.

At March 31, 2021, options to purchase 90,000 shares have been granted under the 2009 Plan.

Of these, 36,000 shares have been exercised, and options for 54,000 shares remain outstanding.

The following table is a summary of the stock option activity during 2021:

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Options cancelled or forfeited

Outstanding at September 30, 2020

Outstanding at March 31, 2021

Options Vested

Exercisable at September 30, 2020

Exercisable at March 31, 2021

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

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96 months after Grant Dates

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.

Compensation costs were approximately $1,000 for both the three months ended March 31, 2021 and 2020 based upon the estimated grant date fair value calculations.

As of March 31, 2021, there was approximately $12,000 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 3.17 years.

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

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.

For the three months ended March 31, 2020, 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 2020 Annual Report to Shareholders.

Avalon measures segment profit for internal reporting purposes as income (loss) before taxes.

Avalon measures segment profit for internal reporting purposes as income (loss) before income taxes.

Business segment information including the reconciliation of segment income before taxes to income (loss) before taxes is as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Net operating revenues from:

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Corporate interest expense

Corporate gain on debt extinguishment

Corporate other income, net

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Income (loss) before income taxes

September 30,

Gain on debt extinguishment:

Waste management services

Golf and related operations

Total gain on debt extinguishment

Identifiable assets:

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Elimination of intersegment receivables

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 $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.

In comparing the total assets at March 31, 2021 with those at December 31, 2020, the increase in the total assets of the waste management services segment of $1.5 million is primarily a result of an increase in accounts receivable and intersegment transactions, which are eliminated in consolidation.

The increase in total assets of the golf and related operations segment of $1.8 million was primarily due to an increase in accounts receivable and capital expenditures related to The Grand Resort and Avalon Field Club at New Castle partially offset by current year depreciation on property and equipment.

The decrease in corporate total assets of approximately $1.0 million is due to a decrease in operating cash and cash equivalents, restricted cash utilized for the expansion of The Grand Resort and Avalon Field Club at New Castle and intersegment transactions, which are eliminated in consolidation.

Certain Relationships and Related Transactions

AWMS Holdings, LLC

In August 2013, Avalon created a new Ohio limited liability company, AWMS Holdings, LLC, to act as a holding company to form and own a series of wholly owned subsidiaries that will own and operate Class II salt water injection wells and facilities (together the “facilities”).

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

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

At March 31, 2021 and December 31, 2020, 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.

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The amount of net loss attributable to the noncontrolling interest is recorded in “net loss attributable to noncontrolling interest” in our Condensed Consolidated Statements of Operations.

Avalon Med Spa, LLC

In March 2021, Avalon created a new Ohio limited liability company, Avalon Med Spa, LLC.

Avalon Med Spa, LLC will provide elective appearance improving nonsurgical aesthetic services under the supervision of a licensed physician.

Avalon Med Spa, LLC, offers investment opportunities to accredited investors by selling membership units through private placement offerings.

The monies received from these offerings, along with internally contributed capital, will be used to purchase medical spa equipment and construct the facilities necessary for operation.

Avalon will manage all decisions regarding the medical spa operations for a percentage of the gross revenues.

In March 2021, Avalon made a capital contribution of approximately $0.5 million, which included cash and certain equipment, in exchange for membership units of Avalon Med Spa, LLC.

At March 31, 2021, Avalon owns 100% of Avalon Med Spa, LLC.

Avalon Med Spa, LLC was not in operation at March 31, 2021.

The operating results will be included in Avalon’s golf and related operations segment.

Injection Wells Suspension

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The Company appealed that decision to the Franklin County Court of Common Pleas.

In April 2020, the Division’s motion to dismiss and the Company’s opposition was reviewed by the Court.

In April 2020, the Division’s motion to dismiss and the Company’s opposition were reviewed by the Court.

The Company is currently awaiting judgment from the Court.

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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

New Castle Country Club property

On May 13, 2019, Havana Cigar Shop, Inc., a wholly owned subsidiary of Avalon, entered into an asset Purchase and Sale Agreement with New Castle Country Club (“the Club”) for the purchase of the real property assets associated with the Club.

Havana Cigar Shop, Inc.

concurrently entered into an Assignment and Assumption and Commercial Loan Modification Agreement with Mercer County State Bank for the outstanding debt under the Club’s Commercial Mortgage and Demand Line of Credit, as amended, (collectively the “Agreements”) at closing as consideration for the purchase of the real property of the Club.

The total amount of outstanding debt under the Agreements assumed by Havana Cigar Shop, Inc., at closing was approximately $0.8 million which consisted of approximately $0.1 million under the Demand Line of Credit and $0.7 million under the Commercial Mortgage agreement.

The outstanding balance under the Commercial Demand Line of Credit was repaid in the second quarter of 2019 and in the fourth quarter of 2019 the Commercial Demand Line of Credit was terminated.

The remaining outstanding balance under the Commercial Mortgage was refinanced and terminated in conjunction with the New Term Loan Agreement (See Note 9).

Subsequent to the asset Purchase and Sale Agreement, Havana Cigar Shop, Inc.

was named The Avalon Field Club at New Castle.

The Avalon Field Club at New Castle is currently in operation.

The operating results are included in the Company’s Condensed Consolidated Statements of Operations and within Avalon’s golf and related operations segment from the date of acquisition.

The net operating revenues and results of operations related to The Avalon Field Club at New Castle from the period of acquisition are not significant and, accordingly, are not provided.

The acquisition is consistent with the Company’s golf operations business strategy as members of the Avalon Golf and Country Club have access to all the golf and related country club activities offered by The Avalon Field Club at New Castle.

In addition, hotel guests at The Grand Resort can utilize the facility during their stay.

The Avalon Field Club at New Castle earns revenue through membership dues, food, beverage and merchandise sales, greens fees and associated cart rentals.

The Company accounted for the acquisition of The Avalon Field Club at New Castle in accordance with ASU 2017-01, Business Combinations (“ASU 2017-01”).

In accordance with ASU 2017-01, the Company evaluated whether to account for the transaction as either a business or asset acquisition.

The Company determined that all of the fair value of the gross assets acquired was concentrated in the real property.

In accordance with the guidance, assets that are attached to each other, such as land and a building residing on the land which cannot be physically removed and used separately from each other without incurring significant cost are considered to be a single identifiable asset.

In accordance with ASU 2017-01, the Company accounted for the transaction as an asset acquisition as all of the value of the gross assets acquired resides in that single asset.

The Company capitalized approximately $67,000 of transaction costs as a component of the cost of the real property assets acquired in accordance with ASU 2017-01.

The Avalon Field Club also assumed the remaining term of the Club’s golf cart operating lease.

At acquisition the Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately $126,000.

The golf cart operating lease had a remaining lease term of 3 years at the acquisition date.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the transaction date (in thousands):

Assets acquired:

Building and land

Operating lease right-of-use assets

Prepaid real estate taxes

Total assets acquired:

Liabilities assumed:

Commercial mortgage

Demand line of credit

Obligations under operating leases

Total liabilities assumed

Total consideration

COVID-19 Coronavirus Pandemic

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

The Company is currently preparing for trial which is scheduled to occur in September and October 2021.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information which management believes is relevant to an assessment and understanding of the operations and financial condition of Avalon Holdings Corporation and its subsidiaries.

As used in this report, the term “ Avalon ” or the “ Company ” means Avalon Holdings Corporation, its wholly owned subsidiaries and variable interest entities when it has been determined that Avalon is the primary beneficiary of those company ’ s operations, taken as a whole, unless the context indicates otherwise.

Statements included in Management ’ s Discussion and Analysis of Financial Condition and Results of Operations which are not historical in nature are intended to be, and are hereby identified as, “ forward looking statements ” .

Avalon cautions readers that forward looking statements, including, without limitation, those relating to Avalon ’ s future business prospects, revenues, working capital, liquidity, capital needs, interest costs, and income, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward looking statements, due to risks and factors identified herein and from time to time in Avalon ’ s reports filed with the Securities and Exchange Commission.

Liquidity and Capital Resources

For the three months ended March 31, 2021, Avalon utilized existing cash and cash provided by operations to meet operating needs and make required monthly payments on our term loan facility.

Cash in our project fund account was utilized to fund capital expenditures which included the continued renovation of The Grand Resort and Avalon Field Club at New Castle as further described below.

Financial Impact of COVID-19 Pandemic