What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-11-12 · 301 added, 551 removed, 918 unchanged (48% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Net operating revenues:

2 unchanged sentences

$ 11,150  

$ 31,279  

$ 29,547  

Food, beverage and merchandise sales

Other golf and related operations

12,917  

Total golf and related operations

21,525  

14,548  

Total net operating revenues

1 unchanged sentence

15,113  

52,804  

44,095  

Costs and expenses:

Waste management services operating costs

25,055  

23,473  

Cost of food, beverage and merchandise

Golf and related operations operating costs

13,356  

Depreciation and amortization expense

Selling, general and administrative expenses

Operating income

Operating loss

( 1,166 )  

Other income (expense):

1 unchanged sentence

( 278 )  

( 302 )  

( 878 )  

Gain on debt extinguishment

1 unchanged sentence

Income (loss) before income taxes

( 1,380 )  

Provision for income taxes

Net income (loss)

Less net loss attributable to non-controlling interest in subsidiaries

( 1,400 )  

Less net loss attributable to non-controlling interest in subsidiaries

( 138 )  

5 unchanged sentences

$ 0.18  

$ 0.63  

Diluted net income (loss) per share

1 unchanged sentence

$ 0.18  

$ 0.62  

Weighted average shares outstanding - basic

4 unchanged sentences

(in thousands, except per share amounts)          

September 30,

Current Assets:

3 unchanged sentences

Accounts receivable, less allowance for credit losses

10,737  

Unbilled membership dues receivable

22 unchanged sentences

Accounts payable

10,196  

10,164  

Accrued payroll and other compensation

26 unchanged sentences

37,720  

38,977  

Total liabilities and equity

6 unchanged sentences

(in thousands, except for share data)

For the Three Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Non-controlling

Shareholders'

Balance at July 1, 2021

Balance at January 1, 2022

3,287,647  

7 unchanged sentences

Investment in subsidiary from accredited investor

Net income (loss)

( 1,262 )  

Balance at September 30, 2021

( 1,262 )  

( 138 )  

$ 59,200  

$ ( 19,701 )  

$ 39,538  

$ 39,556  

For the Three Months Ended September 30, 2020

Non-controlling

Shareholders'

Balance at July 1, 2020

3,263,647  

611,784  

$ 59,150  

$ ( 23,404 )  

$ 35,785  

$ ( 95 )  

$ 35,690  

Stock options - compensation costs

Net income (loss)

Balance at September 30, 2020

Balance at March 31, 2022

3,287,647  

5 unchanged sentences

$ 37,720  

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, 2021

For the Three Months Ended March 31, 2021

Non-controlling

9 unchanged sentences

Stock options - compensation costs

Investment in subsidiary from accredited investors

Net income (loss)

( 28 )  

Balance at September 30, 2021

3,287,647  

611,784  

$ 59,200  

$ ( 19,701 )  

$ 39,538  

$ 39,556  

For the Nine Months Ended September 30, 2020

Non-controlling

Shareholders'

Balance at January 1, 2020

3,263,647  

611,784  

$ 59,147  

$ ( 22,156 )  

$ 37,030  

$ ( 66 )  

$ 36,964  

Stock options - compensation costs

( 467 )  

( 37 )  

Balance at September 30, 2020

Balance at March 31, 2021

3,287,647  

9 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

1 unchanged sentence

$ ( 1,400 )  

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

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

Depreciation and amortization expense

2 unchanged sentences

Provision for losses on accounts receivable

(Gain) loss from disposal of equipment

Gain from disposal of equipment

Gain on debt extinguishment

( 1,964 )  

Change in operating assets and liabilities:

15 unchanged sentences

Other liabilities and accrued expenses

Net cash provided by (used in) operating activities

( 402 )  

Net cash provided by operating activities

Cash flows from investing activities:

6 unchanged sentences

Proceeds from subsidiary private placement offering

Proceeds under Paycheck Protection Program loans

Principal payments on term loan facilities

2 unchanged sentences

( 13 )  

Net cash provided by (used in) financing activities

Net cash used in financing activities

( 158 )  

Increase (decrease) in cash, cash equivalents and restricted cash

Decrease in cash, cash equivalents and restricted cash

( 1,844 )  

10 unchanged sentences

Operating lease right-of-use assets in exchange for lease obligations

Finance lease obligations incurred

Cash paid during the period for interest

3 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Description of Business

14 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, 2021, 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, 2022, 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 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 the nine months ended September 30, 2020.

As a result of the government mandates being subsequently lifted, the COVID- 19 pandemic had a limited impact on our results of operations during the nine months ended September 30, 2021.

Due to the ongoing uncertainty of COVID- 19, we cannot predict the future impact that the pandemic 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 began taking 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.

During the nine months ended September 30, 2020, the various governmental orders that were issued to control the spread of COVID- 19 adversely impacted our operations and related financial results.

Our restaurants operated under 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.

Although the various government mandates impacting our business operations have currently been 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.

In March 2020, both federal and state governmental bodies took unprecedented measures to try and control the spread of the COVID- 19 coronavirus 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.

Although the various government mandates impacting our business operations have currently been lifted, we may experience weakened demand in light of travel restrictions or warnings, consumer fears and reduced consumer discretionary spending and general economic uncertainty.

The full extent of the impact of the COVID- 19 pandemic on our operations and financial performance will depend on future developments, including the duration and spread of the pandemic and the impact of COVID- 19 variants, all of which are uncertain and cannot be predicted at this time.

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.

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

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

Recent Accounting Pronouncements

3 unchanged sentences

ASU 2020 - 04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

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 adoption of this pronouncement and does not expect the adoption to have an impact on the Company's financial position, results of operations or financial disclosures.

ASU 2020 - 04 was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022.

The Company has not applied any optional expedients and exceptions to date, and will continue to evaluate the impact of the guidance and whether it will apply the optional expedients and exceptions.

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, 2021 and December 31, 2020 ( in thousands):

September 30,

Cash, cash equivalents and restricted cash consist of the following at March 31, 2022 and December 31, 2021 ( in thousands):

Cash and cash equivalents

25 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 both the three and nine months ended September 30, 2021 and 2020.

For the three months ended September 30, 2021 and 2020, the net operating revenues related to waste management services represented approximately 54 % and 56 %, respectively, of Avalon’s total consolidated net operating revenues.

For the nine months ended September 30, 2021 and 2020, the net operating revenues related to waste management services represented approximately 59 % and 67 %, respectively, of Avalon’s total consolidated net operating revenues.

For the nine months ended September 30, 2021, one customer accounted for 12 % of the waste management services segment’s net operating revenues to external customers and 7 % of the consolidated net operating revenues.

For the nine months ended September 30, 2020, 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, 2022 and 2021.

For the three months ended March 31, 2022 and 2021, the net operating revenues related to waste management services represented approximately 65 % and 74 %, respectively, of Avalon’s total consolidated net operating revenues.

For the three months ended March 31, 2022, two customers accounted for 20 % of the waste management services segment’s net operating revenues to external customers and 13 % of the 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 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 western Pennsylvania, were minimal during the first three months of 2022 and 2021.

For the three months ended September 30, 2021 and 2020, the net operating revenues related to the golf and related operations represented approximately 46 % and 44 %, respectively, of Avalon’s total consolidated net operating revenues.

For the nine months ended September 30, 2021 and 2020, the net operating revenues related to the golf and related operations represented approximately 41 % and 33 %, respectively, of Avalon’s total consolidated net operating revenues.

For both the nine months ended September 30, 2021 and 2020, 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, 2022 and 2021, the net operating revenues related to the golf and related operations represented approximately 35 % and 26 %, respectively, of Avalon’s total consolidated net operating revenues.

For both the three months ended March 31, 2022 and 2021, 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.

21 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, 2021 and 2020 (in thousands).

The following table presents our net operating revenues disaggregated by revenue source for the three months ended March 31, 2022 and 2021 (in thousands).

Sales and other taxes are excluded from revenues.

Three Months Ended

Nine Months Ended

September 30,

Waste management and brokerage services

1 unchanged sentence

$ 10,551  

$ 29,470  

$ 27,818  

Captive landfill management operations

1 unchanged sentence

11,150  

31,279  

29,547  

Food, beverage and merchandise sales

2 unchanged sentences

Greens fees and cart rental revenue

Tennis lesson revenue

Salon and spa services

Fitness and tennis lesson revenue

Other revenue

Total golf and related operations revenue

21,525  

14,548  

Total net operating revenues

1 unchanged sentence

$ 15,113  

$ 52,804  

$ 44,095  

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

2 unchanged sentences

The amounts due are stated at their net realizable value.

At September 30, 2021 and December 31, 2020, accounts receivable, net, related to our waste management services segment were approximately $ 8.5 million and $ 7.9 million, respectively.

At September 30, 2021, one customer accounted for approximately 21 % of the waste management services segment’s receivables and 18 % 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 $ 1.4 million and $ 0.8 million at September 30, 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 September 30, 2021 or December 31, 2020.

At March 31, 2022 and December 31, 2021, accounts receivable, net, related to our waste management services segment were approximately $ 7.9 million and $ 9.0 million, respectively.

At March 31, 2022, two customers accounted for approximately 22 % of the waste management services segment’s receivables and 16 % of the consolidated receivables.

At December 31, 2021, one customer accounted for approximately 19 % of the waste management services segment’s receivables and 17 % of the consolidated receivables.

Accounts receivable, net, related to our golf and related operations segment were approximately $ 2.8 million and $ 0.9 million at March 31, 2022 and December 31, 2021, 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, 2022 or December 31, 2021.

The Company maintains an allowance for credit losses 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 credit losses, or to income, as appropriate under the circumstances.

Allowance for credit losses was approximately $ 0.3 million at September 30, 2021 and December 31, 2020.

The following table presents changes in our allowance for credit losses during the three and nine months ended September 30, 2021 and 2020 (in thousands):

Balance at Beginning of Period

Write-offs less

Balance at End of Period

Allowance for credit losses was approximately $ 0.3 million at both March 31, 2022 and December 31, 2021.

The following table presents changes in our allowance for credit losses during the three months ended March 31, 2022 and 2021 (in thousands):

Beginning of Period

End of Period

Allowance for credit losses

Three months ended September 30, 2021

$ ( 18 )  

Three months ended September 30, 2020

$ ( 4 )  

Nine months ended September 30, 2021

Three months ended March 31, 2022

$ ( 12 )  

Nine months ended September 30, 2020

Three months ended March 31, 2021

$ ( 5 )  

3 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 $ 0.8 million at September 30, 2021 and $ 0.6 million at December 31, 2020.

The following table presents changes in our contract assets during the three and nine months ended September 30, 2021 and 2020 (in thousands):

Balance at Beginning of Period

Unbilled Membership

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $ 0.8 million at March 31, 2022 and $ 0.6 million at December 31, 2021.

The following table presents changes in our contract assets during the three months ended March 31, 2022 and 2021 (in thousands):

Beginning of Period

Balance at End of Period

1 unchanged sentence

Unbilled membership dues receivable

Three months ended September 30, 2021

$ 1,102  

$ ( 500 )  

Three months ended September 30, 2020

$ 1,109  

$ ( 548 )  

Nine months ended September 30, 2021

$ 1,802  

$ ( 1,548 )  

Nine months ended September 30, 2020

Three months ended March 31, 2022

$ ( 458 )  

Three months ended March 31, 2021

$ ( 469 )  

3 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 were approximately $ 4.4 million at September 30, 2021 and $ 3.2 million at December 31, 2020, respectively.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets were approximately $ 4.9 million at March 31, 2022 and $ 3.4 million at December 31, 2021, respectively.

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

2 unchanged sentences

in our Condensed Consolidated Balance Sheets.

Customer advance deposits were approximately $ 0.7 million at September 30, 2021 and December 31, 2020.

The following table presents changes in our contract liabilities during the three and nine months ended September 30, 2021 and 2020 (in thousands):

Balance at Beginning of Period

Revenue Recognized

Balance at End of Period

Customer advance deposits were approximately $ 0.9 million at March 31, 2022 and $ 0.8 million at December 31, 2021.

The following table presents changes in our contract liabilities during the three months ended March 31, 2022 and 2021 (in thousands):

Beginning of Period

End of Period

Contract Liabilities:

Deferred membership dues revenue

Three months ended September 30, 2021

$ 5,376  

$ ( 1,684 )  

$ 4,422  

Three months ended September 30, 2020

$ 4,776  

$ ( 1,522 )  

$ 4,041  

Nine months ended September 30, 2021

Three months ended March 31, 2022

$ 3,363  

2 unchanged sentences

$ 4,943  

Nine months ended September 30, 2020

Three months ended March 31, 2021

$ 3,196  

3 unchanged sentences

Customer advance deposits

Three months ended September 30, 2021

$ ( 688 )  

Three months ended September 30, 2020

$ ( 301 )  

Nine months ended September 30, 2021

$ 1,299  

Three months ended March 31, 2022

$ ( 263 )  

Nine months ended September 30, 2020

Three months ended March 31, 2021

$ ( 154 )  

7 unchanged sentences

in our Condensed Consolidated Statements of Operations.

Property and equipment at September 30, 2021 and December 31, 2020 consists of the following (in thousands):

September 30,

Property and equipment at March 31, 2022 and December 31, 2021 consists of the following (in thousands):

Land and land improvements

14 unchanged sentences

$ 53,338  

At September 30, 2021, the Company did not have any significant fixed contractual commitments for construction projects.

At March 31, 2022, 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 2021 and 2020, no triggering events were present.

During the first three months of 2022 and 2021, no triggering events were present.

Operating Leases

1 unchanged sentence

Our operating leases have remaining lease terms ranging from less than 1 year to 5.0 years.

The weighted average remaining lease term on operating leases was approximately 3.0 years at September 30, 2021.

During the first nine months of 2021, the Company entered into new operating lease agreements for a facility and golf cart GPS equipment.

The Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $ 67,000 .

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 3.5 years at March 31, 2022.

During the first three months of 2022, 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 $ 31,000 .

Leased property and associated obligations under operating leases at September 30, 2021 and December 31, 2020 consists of the following (in thousands):

September 30,

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 March 31, 2022 and December 31, 2021 consists of the following (in thousands):

Operating lease right-of-use assets

6 unchanged sentences

$ 1,598  

The weighted average discount rate on operating leases was 4.7 % at September 30, 2021 and December 31, 2020.

The weighted average discount rate on operating leases was 4.6 % at March 31, 2022 and December 31, 2021.

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, 2021 there were approximately 32.0 years remaining on the golf course and related facilities finance lease.

At March 31, 2022 there were approximately 31.6 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, 2021, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 3.7 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 2.9 years at September 30, 2021.

Leased property and associated obligations under finance leases at September 30, 2021 and December 31, 2020 consists of the following (in thousands):

September 30,

At March 31, 2022, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 4.6 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.2 years at March 31, 2022.

Leased property and associated obligations under finance leases at March 31, 2022 and December 31, 2021 consists of the following (in thousands):

Leased property under finance leases

3 unchanged sentences

( 6,715 )  

Leased property under finance leases, net

Leased property under finace leases, net

$ 5,301  

3 unchanged sentences

Total obligations under finance leases

The weighted average discount rate on finance leases was 4.8 % at September 30, 2021 and 4.5 % at December 31, 2020.

For the three and nine months ended September 30, 2021 and 2020, components of lease expense were as follows (in thousands):

The weighted average discount rate on finance leases was 5.1 % at March 31, 2022 and December 31, 2021.

For the three months ended March 31, 2022 and 2021, 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

For the twelve months ending September 30, future commitments under long-term, operating and finance leases are as follows (in thousands):

For the twelve months ending March 31, future commitments under long-term, operating and finance leases are as follows (in thousands):

Total lease payments

3 unchanged sentences

$ 1,069  

$ 1,562  

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 both the three and nine months ended September 30, 2021, the weighted average number of common shares outstanding was 3,899,431 .

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

For both the three months ended March 31, 2022 and 2021, the weighted average number of common shares outstanding was 3,899,431 .

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 the three months ended September 30, 2021, the diluted weighted average number of shares outstanding was 3,930,869 .

For the nine months ended September 30, 2021, the diluted weighted average number of shares outstanding was 3,934,838 .

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 March 31, 2022, 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 three months ended March 31, 2022 was 3,924,788 .

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

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.

Term Loan Agreement

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

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 September 30, 2021 and December 31, 2020, loan proceeds of $ 2.1 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.

Avalon has the right to prepay the amount outstanding under the New Term Loan Agreement, in whole or in part, at any time upon payment of the principal amount of the loan to be prepaid plus accrued unpaid interest thereon to the prepayment date, plus an applicable prepayment penalty.

At March 31, 2022 and December 31, 2021, loan proceeds of $ 0.7 million and $ 1.7 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 Term Loan Agreement.

The 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 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.

Avalon has the right to prepay the amount outstanding under the Term Loan Agreement, in whole or in part, at any time upon payment of the principal amount of the loan to be prepaid plus accrued unpaid interest thereon to the prepayment date, plus an applicable prepayment penalty.

The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is five percent ( 5 %) on any prepayment in the first five years;

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and two percent ( 2 %) on any prepayment in the tenth year.

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.

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

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

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

Avalon was in compliance with the Term Loan Agreement covenants at March 31, 2022 and December 31, 2021.

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

The Company is amortizing these costs over the life of the 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.

No amounts were drawn under the Line of Credit Agreement at September 30, 2021 and December 31, 2020.

No amounts were drawn under the Line of Credit Agreement at March 31, 2022 and December 31, 2021.

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

At September 30, 2021, the interest rate on the Line of Credit Agreement was 3.50 %.

At March 31, 2022, the interest rate on the Line of Credit Agreement was 3.75 %.

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, 2021 and December 31, 2020.

Avalon was in compliance with the Line of Credit Agreements covenants at March 31, 2022 and December 31, 2021.

Paycheck Protection Program Loan

The Coronavirus Aid, Relief, and Economic Security Act, or (“CARES”) Act, was signed into law on March 27, 2020, and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID- 19 pandemic.

The CARES Act authorized the Small Business Administration to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (the “Program”).

The Coronavirus Aid, Relief, and Economic Security Act, or (“CARES”) Act, which was signed into law in March 2020, authorized the Small Business Administration to temporarily guarantee loans under a loan program called the Paycheck Protection Program (the “Program”).

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 2.5 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, at the borrowers election, either an 8 or 24 week covered 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 the 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, at the borrowers election, in either 18 or 54 equal monthly installments commencing 10 months after the end of their covered period.

Collateral or guarantor support is not required for the loan.

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 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 utilized the entire balance of the loan proceeds in accordance with the Program’s guidelines and subsequently applied for forgiveness with the Small Business Administration.

The Company accounted for the loans in accordance with ASC 470 –

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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 first quarter of 2021, approximately $ 1.1 million of the loans and $ 8,000 of associated interest were forgiven by the Small Business Administration and, during the second quarter of 2021, the remaining $ 0.9 million of the loans and $ 9,000 of associated interest were forgiven by the Small Business Administration.

During the three months ended September 30, 2021 and 2020, the weighted average interest rate on outstanding borrowings was 5.00 % and 4.57 %, respectively.

During the nine months ended September 30, 2021 and 2020, the weighted average interest rate on outstanding borrowings was 4.91 % and 4.74 %, respectively.

Obligations under the Company’s debt agreements at September 30, 2021 and December 31, 2020 consist of the following (in thousands):

September 30, 2021

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.

As of March 31, 2022, all loan proceeds received under the Program and related interest has been forgiven by the Small Business Administration.

During the three months ended March 31, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00 % and 4.80 %, respectively.

Obligations under the Company’s debt agreements at March 31, 2022 and December 31, 2021 consist of the following (in thousands):

March 31, 2022

Debt Issuance Costs

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$ 20,502  

Paycheck Protection Program Loans

23,908  

( 373 )  

23,535  

Less current portion

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$ 19,376  

For the twelve months ending September 30, future maturities of long-term debt are as follows (in thousands):

For the twelve months ending March 31, future maturities of long-term debt are as follows (in thousands):

$ 1,182  

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$ 20,546  

During the three months ended September 30, 2021 and 2020, net income attributable to Avalon Holdings Corporation shareholders was $ 1.0 million and $ 0.8 million, respectively.

During the nine months ended September 30, 2021, net income attributable to Avalon Holdings Corporation shareholders was $ 2.4 million compared to a net loss attributable to Avalon Holdings Corporation shareholders of $ 0.5 million during the nine months ended September 30, 2020.

Avalon recorded a state income tax provision in both the three and nine month periods ended September 30, 2021 and 2020, which was related entirely to the waste management and brokerage operations.

During the three months ended March 31, 2022, net loss attributable to Avalon Holdings Corporation shareholders was $ 1.3 million compared to net income attributable to Avalon Holdings Corporation shareholders of $ 0.7 million during the three months ended March 31, 2021.

Avalon recorded a state income tax provision in both the three month periods ended March 31, 2022 and 2021, 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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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.

The adoption of the Appropriations Act did not result in a material tax or cash benefit.

Long-Term Incentive Plan

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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 September 30, 2021, options to purchase 90,000 shares have been granted under the 2009 Plan.

In March 2022, 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.

At March 31, 2022, 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 2022:

Number of Options

Weighted Average

Fair Value at

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Options expired

( 190,000 )  

Options cancelled or forfeited

Outstanding at September 30, 2021

Outstanding at March 31, 2022

54,000  

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$ 0.43  

Exercisable at September 30, 2021

Exercisable at March 31, 2022

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

1 )    

Contract Vesting Term:

The stock options vest ratably over a five year period.

2 )    

The Avalon common stock price traded on a public stock exchange (NYSE Amex) must reach the predetermined vesting price within three years after the options become vested under the contractual vesting term.

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$ 12.07  

Compensation costs were approximately $ 1,000 for both the three month periods ended September 30, 2021 and 2020, and $ 4,000 for both the nine month periods ended September 30, 2021 and 2020, based upon the estimated grant date fair value calculations.

As of September 30, 2021, there was approximately $ 8,000 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 month periods ended March 31, 2022 and 2021.

As of March 31, 2022, there was approximately $ 6,000 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 2.17 years.

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Some of these proceedings may result in fines, penalties or judgments being assessed against Avalon which, from time to time, may have an impact on its business and financial condition.

Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty, Avalon does not believe that any uninsured ultimate liabilities, fines or penalties resulting from such pending proceedings, individually or in the aggregate, will have a material adverse effect on its liquidity, financial position or results of operations (See Note 16 ).

In August 2018, Avalon filed a complaint in the United States District Court for the Southern District of New York against Guy Gentile and MintBroker International, Ltd (collectively “MintBroker”).

The complaint seeks to recover from MintBroker all short-swing trading profits realized through its purchases and subsequent sales of the Avalon Class A Common Stock during the six month period ending on or about August 1, 2018, in accordance with Section 16 (b) of the Securities Exchange Act of 1934, as amended, based on MintBroker’s Schedule 13 (d), Form 3 and Form 4 filings made with the Securities and Exchange Commission.

In April 2022, the United States District Court for the Southern District of New York determined that MintBroker was liable under Section 16 (b) of the Securities Exchange Act of 1934, as amended.

The case was referred to a magistrate judge for a determination of damages.

There can be no assurance that any damages determined by the court are collectible.

Business Segment Information

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Revenue for the golf and related operations segment consists primarily of membership dues, greens fees, cart rentals, room rentals, merchandise sales, tennis and fitness activities, salon and spa services and food and beverage sales.

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

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

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

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 2021 Annual Report to Shareholders.

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):

Business segment information including the reconciliation of segment income (loss) to consolidated 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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$ 11,150  

$ 31,279  

$ 29,547  

Intersegment revenues

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11,150  

31,279  

29,547  

Golf and related operations:

External customer revenues

21,525  

14,548  

Intersegment revenues

Total golf and related operations

21,557  

14,585  

Segment operating revenues

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15,121  

52,836  

44,132  

Intersegment eliminations

( 15 )  

( 32 )  

Total net operating revenues

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$ 15,113  

$ 52,804  

$ 44,095  

Three Months Ended

Nine Months Ended

September 30,

Income (loss) before income taxes:

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$ 1,143  

$ 2,710  

Golf and related operations

Segment income before income taxes

Corporate interest expense

( 836 )  

Segment income before income taxes

( 182 )  

Corporate interest expense

( 269 )  

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( 930 )  

( 789 )  

( 3,084 )  

Income (loss) before income taxes

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$ 1,087  

September 30,

Identifiable assets:

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$ 78,037  

In comparing total assets at September 30, 2021 with those at December 31, 2020, the increase in the total assets of the waste management services segment of approximately $ 0.7 million was primarily a result of an increase in accounts receivable and, to a lesser extent, an increase in intersegment transactions, which are eliminated in consolidation.

The increase in total assets of the golf and related operations segment of $ 1.6 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 $ 2.6 million was primarily due to a decrease in 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.

In comparing total assets at March 31, 2022 with those at December 31, 2021, the increase in the total assets of the waste management services segment of approximately $ 0.4 million was primarily a result of an increase in intersegment transactions, which are eliminated in consolidation, partially offset by a decrease in accounts receivable.

The increase in total assets of the golf and related operations segment of $ 3.6 million was primarily due to an increase in accounts receivable and capital expenditures associated with The Grand Resort and Avalon Field Club at New Castle and, to a lesser extent, an increase in inventory and prepaid expenses, partially offset by current year depreciation on property and equipment.

The decrease in corporate total assets of approximately $ 1.5 million was primarily due to a decrease in operating and restricted cash utilized for the renovation of The Grand Resort and Avalon Field Club at New Castle, partially offset by an increase in intersegment transactions, which are eliminated in consolidation.

Certain Relationships and Related Transactions

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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, 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.

At March 31, 2022 and December 31, 2021, 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 VIE, and the financial statements of AWMS Holdings, LLC and subsidiaries are included in Avalon’s consolidated financial statements.

ASC 810 - 10 requires noncontrolling interests to be reported as a separate component of equity.

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in our Condensed Consolidated Statements of Operations.

During the three and nine months ended September 30, 2021, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 144,000 and $ 190,000 , respectively.

During the three and nine months ended September 30, 2020, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 8,000 and $ 37,000 , respectively.

During the three months ended March 31, 2022 and 2021, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 62,000 and $ 28,000 , respectively.

Avalon Med Spa, LLC

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Through a private placement offering for the purchase of membership units, Avalon Med Spa, LLC raised $ 358,000 from accredited investors in August 2021.

In March 2022, Avalon and accredited investors made additional capital contributions of $ 143,000 and $ 142,000 , respectively.

An outside director of Avalon, who qualified as an accredited investor, invested less than 10 % of the total investment in Avalon Med Spa, LLC.

Avalon is the majority owner of Avalon Med Spa, LLC owning 50.1 % of the company.

In accordance with ASC 810 - 10 and related amendment , Avalon Med Spa, LLC is a variable interest entity, and the financial statements of Avalon Med Spa, LLC are included in Avalon’s consolidated financial statements.

Avalon is the majority owner of Avalon Med Spa, LLC owning 50.1 % of the company at both March 31, 2022 and December 31, 2021.

In accordance with ASC 810 - 10 and related amendment , Avalon Med Spa, LLC is a VIE, and the financial statements of Avalon Med Spa, LLC are included in Avalon’s consolidated financial statements.

ASC 810 - 10 requires noncontrolling interests to be reported as a separate component of equity.

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in our Condensed Consolidated Statements of Operations.

During the three and nine months ended September 30, 2021, net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was $ 24,000 .

During the three months ended March 31, 2022, net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was approximately $ 76,000 .

Injection Wells Suspension

As a result of a seismic event with a magnitude of 2.1 occurring on August 31, 2014, the Chief of the Division of Oil and Gas Resources Management (“Chief”

or “Division”) issued Orders on September 3, 2014 to immediately suspend all operations of Avalon’s two saltwater injection wells until the Division could further evaluate the wells. 

The Orders were based on the findings that the two saltwater injection wells were located in close proximity to an area of known seismic activity and that the saltwater injection wells pose a risk of increasing or creating seismic activity.

or “Division”) issued Orders on September 3, 2014 to immediately suspend all operations of Avalon’s two saltwater injection wells until the Division could further evaluate the wells. The Orders were based on the findings that the two saltwater injection wells were located in close proximity to an area of known seismic activity and that the saltwater injection wells pose a risk of increasing or creating seismic activity.

On September 5, 2014, Avalon submitted the information required by the Chief’s Order in regards to its AWMS #1 injection well, and the Chief lifted the suspension for that well on September 18, 2014.

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On August 12, 2015, the Commission upheld the temporary suspension of injection operations of AWMS #2 stating that the temporary suspension would allow the Chief more time to fully evaluate the facts in anticipation of the Division’s implementation of a comprehensive regulatory plan that will specifically address injection-induced seismicity. 

Avalon appealed that decision to the Franklin County Court of Common Pleas (the “Court”), and on November 1, 2016 an appeal hearing was held in that Court. 

On December 23, 2016, the Court issued its Decision and Order in Avalon’s favor, and vacated the Commission’s decision. 

Avalon appealed that decision to the Franklin County Court of Common Pleas (the “Court”), and on November 1, 2016 an appeal hearing was held in that Court.

On December 23, 2016, the Court issued its Decision and Order in Avalon’s favor, and vacated the Commission’s decision.

The Court found that the Division’s suspension and refusal to work with the Company over the 26 month period was arbitrary and not in accordance with reason. 

Subsequent to the ruling, and in accordance with the Court’s Decision and Order, both Avalon and the Division submitted their proposed restart plans to the Court. Avalon’s plan sets forth both the initial volumes and pressures and increases in volume and pressure while continuously monitoring seismicity and addressing the concerns of public health and safety. 

On February 21, 2017, the Court issued its Final Decision and Order. The Court’s Final Decision and Order set forth conditions for restarting the AWMS #2 salt water injection well in accordance with the proposed restart plans filed by Avalon with minor revisions. 

On February 22, 2017, the Division appealed the Final Decision and Order and filed a Motion to Stay the Court Order. The Motion to Stay was granted by the Ohio 10 th District Court of Appeals on March 21, 2017.

On February 21, 2017, the Court issued its Final Decision and Order.

The Court’s Final Decision and Order set forth conditions for restarting the AWMS #2 salt water injection well in accordance with the proposed restart plans filed by Avalon with minor revisions. On February 22, 2017, the Division appealed the Final Decision and Order and filed a Motion to Stay the Court Order. The Motion to Stay was granted by the Ohio 10 th District Court of Appeals on March 21, 2017.

On September 14, 2017, an appeal hearing was held in the Ohio 10 th District Court of Appeals and on July 31, 2018 a decision was issued on the appeal.

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The Company appealed the May 2021 Chief’s Order to the Ohio Oil and Gas Commission, seeking reasonable operating conditions that will allow the facility to operate profitably while protecting human health and property.

A hearing in this matter is expected in early 2022.

A hearing in this matter occurred in February 2022.

The Company is currently awaiting judgment.

MANAGEMENT ’

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Liquidity and Capital Resources

For the nine months ended September 30, 2021, Avalon utilized existing cash and cash provided by operations to meet operating needs and make required monthly payments on our term loan facility.

For the three months ended March 31, 2022, 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

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.

During the nine months ended September 30, 2020, the various governmental orders that were issued to control the spread of COVID-19 adversely impacted our operations and related financial results.

Our restaurants operated under 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.

In March 2020, both federal and state governmental bodies took unprecedented measures to try and control the spread of the COVID-19 coronavirus 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 full extent of the impact of the COVID-19 pandemic on our operations and financial performance will depend on future developments, including the duration and spread of the pandemic and the impact of COVID-19 variants, all of which are uncertain and cannot be predicted at this time.

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.

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

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

Paycheck Protection Program Loan

The CARES Act authorized the Small Business Administration to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (the “Program”).

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 2.5 times the business’s average monthly payroll.

Collateral or guarantor support is not required for 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.

Collateral or guarantor support is not required for the loan.

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.

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 first quarter of 2021, approximately $1.1 million of the loans and $8,000 of associated interest were forgiven by the Small Business Administration and, during the second quarter of 2021, the remaining $0.9 million of the loans and $9,000 of associated interest were forgiven by the Small Business Administration.

The Company utilized the entire balance of the loan proceeds in accordance with the Program’s guidelines and subsequently applied for forgiveness with 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.

As of March 31, 2022, all loan proceeds received under the Program and related interest has been forgiven by the Small Business Administration.

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

Capital Expenditures

During the nine months ended September 30, 2021, Avalon incurred capital expenditures of $3.5 million of which $3.2 million of such expenditures was paid to vendors during the period.

Expenditures primarily related to the continued renovation and expansion of The Grand Resort and the clubhouse at Avalon Field Club at New Castle.

During the nine months ended September 30, 2020, Avalon incurred capital expenditures of $3.7 million of which $3.2 million of such expenditures was paid to vendors during the period.

Expenditures primarily related to the continued renovation and expansion of The Grand Resort.

In addition, approximately $0.4 million of such expenditures related to golf course maintenance equipment acquired under new finance lease agreements.

In 2021 and 2020, The Grand Resort was in operation but still in the process of being renovated and expanded.

The renovations and expansion include the renovation of existing hotel rooms and the addition of a new restaurant, bars, cigar lounge, salon and spa.

Avalon’s aggregate capital expenditures in 2021 are expected to be in the range of $4.0 million to $4.5 million, funded with cash from our project fund account.

Capital expenditures principally relate to the continued renovation and expansion of The Grand Resort, the clubhouse at Avalon Field Club at New Castle, building improvements and equipment purchases.

New Term Loan Agreement

Term Loan Agreement

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 September 30, 2021 and December 31, 2020, loan proceeds of $2.1 million and $3.9 million, respectively, remained in the project fund account.

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.

At March 31, 2022 and December 31, 2021, loan proceeds of $0.7 million and $1.7 million, respectively, remained in the project fund account.

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

The 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 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.

The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is five percent (5%) on any prepayment in the first five years;

2 unchanged sentences

and two percent (2%) on any prepayment in the tenth year.