What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-12 · 350 added, 637 removed, 831 unchanged (54% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net operating revenues:

Waste management services

$ 10,717  

$ 8,685  

$ 20,056  

$ 19,835  

Food, beverage and merchandise sales

1 unchanged sentence

Total golf and related operations

13,775  

11,668  

Total net operating revenues

19,522  

16,390  

33,831  

31,503  

Costs and expenses:

Waste management services operating costs

16,070  

15,670  

Cost of food, beverage and merchandise

2 unchanged sentences

Selling, general and administrative expenses

Operating income (loss)

( 574 )  

Operating income

Other income (expense):

Interest expense

( 274 )  

( 291 )  

( 552 )  

Gain on debt extinguishment

Other income, net

Income (loss) before income taxes

( 943 )  

Income before income taxes

Provision for income taxes

Net income (loss)

( 996 )  

Less net loss attributable to non-controlling interest in subsidiaries

( 80 )  

( 18 )  

( 218 )  

Net income (loss) attributable to Avalon Holdings Corporation common shareholders

$ ( 778 )  

$ 1,458  

Income (loss) per share attributable to Avalon Holdings Corporation common shareholders:

Basic net income (loss) per share

$ 0.12  

$ 0.19  

$ ( 0.20 )  

$ 0.37  

Diluted net income (loss) per share

$ 0.12  

$ 0.19  

$ ( 0.20 )  

$ 0.37  

Net income attributable to Avalon Holdings Corporation common shareholders

Income per share attributable to Avalon Holdings Corporation common shareholders:

Basic net income per share

Diluted net income per share

Weighted average shares outstanding - basic

4 unchanged sentences

(in thousands, except per share amounts)          

September 30,

Current Assets:

Cash and cash equivalents

$ 3,267  

$ 3,254  

Accounts receivable, less allowance for credit losses

10,454  

Unbilled membership dues receivable

2 unchanged sentences

Total current assets

17,429  

15,971  

Property and equipment, net

56,279  

53,338  

Property and equipment under finance leases, net

3 unchanged sentences

Other assets, net

$ 80,392  

$ 78,037  

Liabilities and Equity

1 unchanged sentence

Current portion of long-term debt

$ 1,155  

$ 1,126  

Current portion of obligations under finance leases

1 unchanged sentence

Accounts payable

10,954  

10,164  

Accrued payroll and other compensation

4 unchanged sentences

Total current liabilities

21,999  

18,024  

Long-term debt, net of current portion

18,791  

19,376  

Line of credit

Obligations under finance leases, net of current portion

5 unchanged sentences

Paid-in capital

59,203  

59,201  

Accumulated deficit

( 20,949 )  

Total Avalon Holdings Corporation Shareholders' Equity

38,293  

39,069  

Non-controlling interest in subsidiaries

( 168 )  

38,125  

38,977  

Total liabilities and equity

$ 80,392  

$ 78,037  

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(in thousands, except for share data)

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Non-controlling

Shareholders'

Balance at April 1, 2022

3,287,647  

611,784  

$ 59,202  

$ ( 21,433 )  

$ 37,808  

$ ( 88 )  

$ 37,720  

Balance at July 1, 2022

Stock options - compensation costs

Net income (loss)

( 80 )  

Balance at June 30, 2022

3,287,647  

611,784  

$ 59,203  

$ ( 20,949 )  

$ 38,293  

$ ( 168 )  

$ 38,125  

For the Three Months Ended June 30, 2021

Balance at September 30, 2022

For the Three Months Ended September 30, 2021

Non-controlling

Shareholders'

Balance at April 1, 2021

3,287,647  

611,784  

$ 59,197  

$ ( 21,426 )  

$ 37,810  

$ ( 154 )  

$ 37,656  

Balance at July 1, 2021

Stock options - compensation costs

Investment in subsidiary from accredited investor

Net income (loss)

( 18 )  

Balance at June 30, 2021

3,287,647  

611,784  

$ 59,199  

$ ( 20,684 )  

$ 38,554  

$ ( 172 )  

$ 38,382  

Balance at September 30, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(in thousands, except for share data)

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Non-controlling

1 unchanged sentence

Balance at January 1, 2022

3,287,647  

611,784  

$ 59,201  

$ ( 20,171 )  

$ 39,069  

$ ( 92 )  

$ 38,977  

Stock options - compensation costs

Investment in subsidiary from accredited investor

( 778 )  

( 218 )  

Balance at June 30, 2022

3,287,647  

611,784  

$ 59,203  

$ ( 20,949 )  

$ 38,293  

$ ( 168 )  

$ 38,125  

For the Six Months Ended June 30, 2021

Investment in subsidiary 

from accredited investor

Net income (loss)

Balance at September 30, 2022

For the Nine Months Ended September 30, 2021

Non-controlling

1 unchanged sentence

Balance at January 1, 2021

3,287,647  

611,784  

$ 59,196  

$ ( 22,142 )  

$ 37,093  

$ ( 126 )  

$ 36,967  

Stock options - compensation costs

Investment in subsidiary from accredited investor

Net income (loss)

( 46 )  

Balance at June 30, 2021

3,287,647  

611,784  

$ 59,199  

$ ( 20,684 )  

$ 38,554  

$ ( 172 )  

$ 38,382  

Balance at September 30, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net income (loss)

$ ( 996 )  

$ 1,412  

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

Reconciliation of net income to cash provided by operating activities:

Depreciation and amortization expense

6 unchanged sentences

Accounts receivable

( 527 )  

Unbilled membership dues receivable

( 567 )  

( 425 )  

Prepaid expenses

1 unchanged sentence

Accounts payable

( 349 )  

Accrued payroll and other compensation

1 unchanged sentence

Other accrued taxes

( 200 )  

Deferred membership dues revenue

3 unchanged sentences

Capital expenditures

( 3,304 )  

Proceeds from disposal of equipment

Net cash used in investing activities

( 3,304 )  

Cash flows from financing activities:

Proceeds from subsidiary private placement offering

Proceeds under New Term Loan facility

Principal payments on term loan facilities

( 577 )  

Borrowings under line of credit facility

Payments of debt issuance costs

Principal payments on finance lease obligations

( 63 )  

Net cash used in financing activities

( 498 )  

Decrease in cash, cash equivalents and restricted cash

( 1,683 )  

Net cash provided by (used in) financing activities

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

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

$ 3,267  

$ 7,307  

Supplemental disclosure of cash flow information:

1 unchanged sentence

Capital expenditures included in accounts payable

$ 1,139  

Significant non-cash operating and financing activities:

7 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

Description of Business

6 unchanged sentences

In addition, Avalon owns Avalon Resorts and Clubs, Inc.

(“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, salon and spa services, fitness center, outdoor resort pool, Roman Bath, indoor junior Olympic size swimming pool and tennis courts.

5 unchanged sentences

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

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of June 30, 2022, and the results of its operations and cash flows for the interim periods presented.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of September 30, 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.

1 unchanged sentence

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU 2020 - 04”

), establishing Accounting Standards Codification (“ASC”) Topic 848,  

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.

9 unchanged sentences

Restricted cash consists of loan proceeds deposited into a project fund account to fund costs associated with the renovation and expansion of The Grand Resort and Avalon Field Club at New Castle in accordance with the provisions of the loan and security agreement (See Note 9).

Restricted cash in the project fund account was fully utilized at June 30, 2022.

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

Cash, cash equivalents and restricted cash consist of the following at June 30, 2022 and December 31, 2021 ( in thousands):

Cash, cash equivalents and restricted cash consist of the following at September 30, 2022 and December 31, 2021 (in thousands):

September 30,

Cash and cash equivalents

$ 3,267  

$ 3,254  

Restricted cash

Cash, cash equivalents and restricted cash

$ 3,267  

$ 4,950  

Revenue Recognition

18 unchanged sentences

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

Due to the suspension of the salt water injection wells, there were no operating revenues for the three and six months ended June 30, 2022 and 2021.

For the three months ended June 30, 2022 and 2021, the net operating revenues related to waste management services represented approximately 55 % and 53 %, respectively, of Avalon’s total consolidated net operating revenues.

For the six months ended June 30, 2022 and 2021, the net operating revenues related to waste management services represented approximately 59 % and 63 %, respectively, of Avalon’s total consolidated net operating revenues.

For the six months ended June 30, 2022, one customer accounted for 10 % of the waste management services segment’s net operating revenues to external customers and 6 % of the consolidated net operating revenues.

For the six months ended June 30, 2021, one customer accounted for 11 % of the waste management services segment’s net operating revenues to external customers and 7 % of the consolidated net operating revenues.

Due to the suspension of the salt water injection wells, there were no operating revenues for the three and nine months ended September 30, 2022 and 2021.

For the three months ended September 30, 2022 and 2021, the net operating revenues related to waste management services represented approximately 58 % and 54 %, respectively, of Avalon’s total consolidated net operating revenues.

For both the nine months ended September 30, 2022 and 2021, the net operating revenues related to waste management services represented approximately 59 % of Avalon’s total consolidated net operating revenues.

For the nine months ended September 30, 2022, one customer accounted for 10 % of the waste management services segment’s net operating revenues to external customers and 6 % of the 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 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.

22 unchanged sentences

Golf and Related Operations

Avalon’s golf and related operations include the operation and management of four golf courses and associated clubhouses, recreation and fitness centers, tennis courts, salon and spa services, dining and banquet facilities and a travel agency.

The golf and related operations also include the operation of a hotel and its related amenities including dining, banquet and conference facilities, fitness center, indoor junior Olympic size swimming pool and tennis courts.

1 unchanged sentence

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 June 30, 2022 and 2021, the net operating revenues related to the golf and related operations represented approximately 45 % and 47 %, respectively, of Avalon’s total consolidated net operating revenues.

For the six months ended June 30, 2022 and 2021, the net operating revenues related to the golf and related operations represented approximately 41 % and 37 %, respectively, of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2022 and 2021, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

For the three months ended September 30, 2022 and 2021, the net operating revenues related to the golf and related operations represented approximately 42 % and 46 %, respectively, of Avalon’s total consolidated net operating revenues.

For both the nine months ended September 30, 2022 and 2021, the net operating revenues related to the golf and related operations represented approximately 41% of Avalon’s total consolidated net operating revenues.

For both the nine months ended September 30, 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 six months ended June 30, 2022 and 2021 (in thousands).

The following table presents our net operating revenues disaggregated by revenue source for the three and nine months ended September 30, 2022 and 2021 (in thousands).

Sales and other taxes are excluded from revenues.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Waste management and brokerage services

$ 10,028  

$ 8,078  

$ 18,754  

$ 18,629  

Captive landfill management operations

Total waste management services revenues

10,717  

20,056  

19,835  

Food, beverage and merchandise sales

6 unchanged sentences

Total golf and related operations revenue

13,775  

11,668  

Total net operating revenues

$ 19,522  

$ 16,390  

$ 33,831  

$ 31,503  

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 June 30, 2022 and December 31, 2021, accounts receivable, net, related to our waste management services segment were approximately $ 8.1 million and $ 9.0 million, respectively.

At June 30, 2022, two customers accounted for approximately 24 % of the waste management services segment’s receivables and 19 % of the consolidated receivables.

At September 30, 2022 and December 31, 2021, accounts receivable, net, related to our waste management services segment were approximately $ 11.9 million and $ 9.0 million, respectively.

At September 30, 2022, three customers accounted for approximately 38 % of the waste management services segment’s receivables and 34 % 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 $ 2.4 million and $ 0.9 million at June 30, 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 June 30, 2022 or December 31, 2021.

Accounts receivable, net, related to our golf and related operations segment were approximately $ 1.5 million and $ 0.9 million at September 30, 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 September 30, 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 both June 30, 2022 and December 31, 2021.

The following table presents changes in our allowance for credit losses during the three and six months ended June 30, 2022 and 2021 (in thousands):

Allowance for credit losses was approximately $ 0.3 million at both September 30, 2022 and December 31, 2021.

The following table presents changes in our allowance for credit losses during the three and nine months ended September 30, 2022 and 2021 (in thousands):

Beginning of Period

1 unchanged sentence

Allowance for credit losses

Three months ended June 30, 2022

$ ( 4 )  

Three months ended June 30, 2021

$ ( 16 )  

Six months ended June 30, 2022

$ ( 15 )  

Six months ended June 30, 2021

$ ( 15 )  

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Contract Assets

2 unchanged sentences

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

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $ 1.1 million at June 30, 2022 and $ 0.6 million at December 31, 2021.

The following table presents changes in our contract assets during the three and six months ended June 30, 2022 and 2021 (in thousands):

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $ 0.9 million at September 30, 2022 and $ 0.6 million at December 31, 2021.

The following table presents changes in our contract assets during the three and nine months ended September 30, 2022 and 2021 (in thousands):

Beginning of Period

2 unchanged sentences

Unbilled membership dues receivable

Three months ended June 30, 2022

$ ( 580 )  

$ 1,145  

Three months ended June 30, 2021

$ ( 579 )  

$ 1,102  

Six months ended June 30, 2022

$ 1,605  

$ ( 1,038 )  

$ 1,145  

Six months ended June 30, 2021

$ 1,565  

$ ( 1,048 )  

$ 1,102  

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

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 were approximately $ 5.8 million at June 30, 2022 and $ 3.4 million at December 31, 2021, respectively.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets were approximately $ 4.6 million at September 30, 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 $ 1.0 million at June 30, 2022 and $ 0.8 million at December 31, 2021.

The following table presents changes in our contract liabilities during the three and six months ended June 30, 2022 and 2021 (in thousands):

Customer advance deposits were approximately $ 1.0 million at September 30, 2022 and $ 0.8 million at December 31, 2021.

The following table presents changes in our contract liabilities during the three and nine months ended September 30, 2022 and 2021 (in thousands):

Beginning of Period

2 unchanged sentences

Deferred membership dues revenue

Three months ended June 30, 2022

$ 4,943  

$ 2,633  

$ ( 1,794 )  

$ 5,782  

Three months ended June 30, 2021

$ 4,122  

$ 2,915  

$ ( 1,661 )  

$ 5,376  

Six months ended June 30, 2022

$ 3,363  

$ 5,927  

$ ( 3,508 )  

$ 5,782  

Six months ended June 30, 2021

$ 3,196  

$ 5,448  

$ ( 3,268 )  

$ 5,376  

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Customer advance deposits

Three months ended June 30, 2022

$ ( 843 )  

Three months ended June 30, 2021

$ ( 447 )  

Six months ended June 30, 2022

$ 1,303  

$ ( 1,106 )  

Six months ended June 30, 2021

$ ( 601 )  

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Property and Equipment

6 unchanged sentences

in our Condensed Consolidated Statements of Operations.

Property and equipment at June 30, 2022 and December 31, 2021 consists of the following (in thousands):

Property and equipment at September 30, 2022 and December 31, 2021 consists of the following (in thousands):

September 30,

Land and land improvements

$ 15,597  

$ 15,588  

Buildings and improvements

49,019  

48,603  

Machinery and equipment

1 unchanged sentence

Construction in progress

86,683  

82,325  

Less accumulated depreciation and amortization

( 30,404 )  

Property and equipment, net

$ 56,279  

$ 53,338  

At June 30, 2022, the Company did not have any significant fixed contractual commitments for construction projects.

At September 30, 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 six months of 2022 and 2021, no triggering events were present.

During the first nine 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 4.2 years.

The weighted average remaining lease term on operating leases was approximately 3.3 years at June 30, 2022.

During the first six months of 2022, the Company entered into a new operating lease agreement for golf cart GPS equipment.

The weighted average remaining lease term on operating leases was approximately 2.9 years at September 30, 2022.

During the first nine 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 .

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

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 .

Leased property and associated obligations under operating leases at June 30, 2022 and December 31, 2021 consists of the following (in thousands):

Leased property and associated obligations under operating leases at September 30, 2022 and December 31, 2021 consists of the following (in thousands):

September 30,

Operating lease right-of-use assets

$ 1,419  

$ 1,598  

Current portion of obligations under operating leases

1 unchanged sentence

Total obligations under operating leases

$ 1,419  

$ 1,598  

The weighted average discount rate on operating leases was 4.7 % at June 30, 2022 and 4.6 % at December 31, 2021.

The weighted average discount rate on operating leases was 4.7 % at September 30, 2022 and 4.6 % at 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 June 30, 2022 there were approximately 31.3 years remaining on the golf course and related facilities finance lease.

At September 30, 2022 there were approximately 31.1 years remaining on the golf course and related facilities finance lease.

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

At June 30, 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 4.3 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.0 years at June 30, 2022.

Leased property and associated obligations under finance leases at June 30, 2022 and December 31, 2021 consists of the following (in thousands):

At September 30, 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 4.1 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 2.9 years at September 30, 2022.

Leased property and associated obligations under finance leases at September 30, 2022 and December 31, 2021 consists of the following (in thousands):

September 30,

Leased property under finance leases

$ 12,063  

$ 11,978  

Less accumulated amortization

( 6,842 )  

Leased property under finace leases, net

$ 5,221  

$ 5,390  

Current portion of obligations under finance leases

1 unchanged sentence

Total obligations under finance leases

The weighted average discount rate on finance leases was 5.1 % at June 30, 2022 and December 31, 2021.

For the three and six months ended June 30, 2022 and 2021, components of lease expense were as follows (in thousands):

The weighted average discount rate on finance leases was 5.1 % at September 30, 2022 and December 31, 2021.

For the three and nine months ended September 30, 2022 and 2021, components of lease expense were as follows (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating lease cost:

4 unchanged sentences

Total finance lease cost

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

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

Total lease payments

2 unchanged sentences

Long-term portion of obligations under leases

$ 1,377  

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 six months ended June 30, 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.

Basic and Diluted Net Income per Share

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

For both the three and nine months ended September 30, 2022 and 2021, the weighted average number of common shares outstanding was 3,899,431 .

Diluted net income per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing net income 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 June 30, 2022, the diluted weighted average number of shares outstanding was 3,921,656 .

For the six months ended June 30, 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 six months ended June 30, 2022 was 3,923,213 .

For the three and six months ended June 30, 2021, the diluted weighted average number of shares outstanding was 3,928,971 and 3,936,854 , respectively.

For the three and nine months ended September 30, 2022, the diluted weighted average number of shares outstanding was 3,918,512 and 3,921,628 , respectively.

For the three and nine months ended September 30, 2021, the diluted weighted average number of shares outstanding was 3,930,869 and 3,934,838 , respectively.

Term Loans and Line of Credit Agreements

2022 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.

Restricted cash in the project fund account was fully utilized at June 30, 2022.

At December 31, 2021, loan proceeds of $ 1.7 million 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.

On August 5, 2022, Avalon and certain direct and indirect wholly owned subsidiaries entered into a loan and security agreement (the “2022 Term Loan Agreement”) with Laurel Capital Corporation which provided for a $ 31.0 million term loan.

At closing, $ 20.2 million of the proceeds were used to pay off and refinance amounts outstanding and associated interest under our 2019 Term Loan Agreement with Laurel Capital Corporation and $ 0.4 million of the proceeds were utilized to pay transaction costs.

The remaining proceeds of approximately $ 10.4 million were deposited into a project fund account for which those proceeds are to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At September 30, 2022, loan proceeds of $ 10.4 million are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.”

The 2019 Term Loan Agreement was terminated in conjunction with the 2022 Term Loan Agreement.

The 2022 Term Loan Agreement is payable in 119 equal monthly installments of principal and interest, based on a twenty-five (25) year maturity schedule which commenced September 5, 2022 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of August 5, 2032.

Upon request by Avalon, project fund proceeds can be utilized to pay debt service.

Borrowings under the 2022 Term Loan Agreement bear interest at a fixed rate of 6.00 % until the seventh anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 6.00% per annum or (b) the sum of the three year treasury rate on the date two (2) business days prior to the reset date plus 3.40%, provided that the applicable rate shall in no event exceed 8.50% per annum.

Avalon has the right to prepay the amount outstanding under the 2022 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;

The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is six percent (6%) on any prepayment in the first five years;

four percent (4%) on any prepayment in the sixth and seventh year;

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Borrowings under the 2022 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 2022 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, 2023.

The 2022 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 June 30, 2022 and December 31, 2021.

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

Avalon was in compliance with the 2022 Term Loan Agreement covenants at September 30, 2022.

The Company capitalized approximately $ 0.6 million of debt issuance costs in connection with the 2022 Term Loan Agreement in accordance with ASC Subtopic 470-50, Debt-Modifications and Extinguishments .

The Company is amortizing these costs over the life of the 2022 Term Loan Agreement.

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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 June 30, 2022 and December 31, 2021.

At September 30, 2022, approximately $ 1.0 million was outstanding under the Line of Credit Agreement.

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

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

At June 30, 2022, the interest rate on the Line of Credit Agreement was 5.00 %.

At September 30, 2022, the interest rate on the Line of Credit Agreement was 6.50 %.

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

1 unchanged sentence

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

Avalon was in compliance with the Line of Credit Agreements covenants at June 30, 2022 and December 31, 2021.

Paycheck Protection Program Loan

Avalon was in compliance with the Line of Credit Agreements covenants at September 30, 2022 and December 31, 2021.

Paycheck Protection Program Loans

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”).

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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 three months ended June 30, 2021, approximately $ 0.9 million of the loans and $ 9,000 of associated interest were forgiven by the Small Business Administration.

During the six months ended June 30, 2021, approximately $ 2.0 million of the loans and $ 17,000 of associated interest were forgiven by the Small Business Administration.

As of June 30, 2021, all loan proceeds received under the Program and related interest were forgiven by the Small Business Administration.

During the three months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00 % and 4.92 %, respectively.

During the six months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00 % and 4.86 %, respectively.

Obligations under the Company’s debt agreements at June 30, 2022 and December 31, 2021 consist of the following (in thousands):

June 30, 2022

During the nine months ended September 30, 2021, approximately $ 2.0 million of the loans and $ 17,000 of associated interest were forgiven by the Small Business Administration.

As of September 30, 2021, all loan proceeds received under the Program and related interest were forgiven by the Small Business Administration.

During the three months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.69 % and 5.00 %, respectively.

During the nine months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.27 % and 4.91 %, respectively.

Obligations under the Company’s term loan agreements at September 30, 2022 and December 31, 2021 consist of the following (in thousands):

September 30, 2022

Debt Issuance Costs

2022 Term Loan Agreement

$ 20,256  

$ ( 310 )  

$ 19,946  

Less current portion

( 42 )  

Long-term debt

$ 19,059  

$ ( 268 )  

$ 18,791  

December 31, 2021

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2019 Term Loan Agreement

$ 20,833  

$ ( 331 )  

$ 20,502  

Less current portion

( 42 )  

Long-term debt

$ 19,665  

$ ( 289 )  

$ 19,376  

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

$ 1,197  

13,627  

$ 20,256  

During the three months ended June 30, 2022 and 2021, net income attributable to Avalon Holdings Corporation shareholders was $ 0.5 million and $ 0.7 million, respectively.

During the six months ended June 30, 2022, net loss attributable to Avalon Holdings Corporation shareholders was $ 0.8 million compared to net income attributable to Avalon Holdings Corporation shareholders of $ 1.5 million during the six months ended June 30, 2021.

Avalon recorded a state income tax provision in both the three and six month periods ended June 30, 2022 and 2021, which was related entirely to the waste management and brokerage operations.

For the twelve months ending September 30, future maturities under the Company’s 2022 Term Loan Agreement are as follows (in thousands):

During the three months ended September 30, 2022 and 2021, net income attributable to Avalon Holdings Corporation shareholders was $ 1.2 million and $ 1.0 million, respectively.

During the nine months ended September 30, 2022 and 2021, net income attributable to Avalon Holdings Corporation shareholders was $ 0.4 million and $ 2.4 million, respectively.

Avalon recorded a state income tax provision in both the three and nine month periods ended September 30, 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.

Avalon’s income tax on the income (loss) before taxes was offset by a change in the valuation allowance.

Avalon’s income tax on the income before taxes was offset by a change in the valuation allowance.

A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized.

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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’

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.

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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 June 30, 2022, options to purchase 90,000 shares have been granted under the 2009 Plan.

At September 30, 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.

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Outstanding at January 1, 2022

54,000  

Options granted

2 unchanged sentences

Options cancelled or forfeited

Outstanding at June 30, 2022

54,000  

$ 1.83  

$ 0.43  

Outstanding at September 30, 2022

Options Vested

54,000  

$ 1.83  

$ 0.43  

Exercisable at June 30, 2022

Exercisable at September 30, 2022

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

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48 months after Grant Dates

$ 3.43  

24 months after Grant Dates

60 months after Grant Dates

$ 4.69  

36 months after Grant Dates

72 months after Grant Dates

$ 6.43  

48 months after Grant Dates

84 months after Grant Dates

$ 8.81  

60 months after Grant Dates

96 months after Grant Dates

$ 12.07  

For the three months ended June 30, 2022 and 2021, compensation costs were approximately $ 1,000 and $ 2,000 , respectively.

For the six months ended June 30, 2022 and 2021, compensation costs were approximately $ 2,000 and $ 3,000 , respectively.

As of June 30, 2022, there was approximately $ 5,000 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 September 30, 2022 and 2021.

For the nine months ended September 30, 2022 and 2021, compensation costs were approximately $ 3,000 and $4,000, respectively.

As of September 30, 2022, there was approximately $ 4,000 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 1.67 years.

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Avalon’s primary business segment, the waste management services segment, provides hazardous and nonhazardous brokerage and management services to industrial, commercial, municipal and governmental customers, captive landfill management for an industrial customer and salt water injection well operations.

Avalon’s golf and related operations segment consists of four golf courses and associated clubhouses which provide dining and banquet facilities, a hotel which provides lodging and resort related amenities including dining, banquet and conference facilities, a multipurpose recreation center and a travel agency.

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 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net operating revenues from:

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External customer revenues

$ 10,717  

$ 8,685  

$ 20,056  

$ 19,835  

Intersegment revenues

Total waste management services

10,717  

20,056  

19,835  

Golf and related operations:

External customer revenues

13,775  

11,668  

Intersegment revenues

Total golf and related operations

13,806  

11,685  

Segment operating revenues

19,552  

16,399  

33,862  

31,520  

Intersegment eliminations

( 30 )  

( 31 )  

Total net operating revenues

$ 19,522  

$ 16,390  

$ 33,831  

$ 31,503  

Three Months Ended

Six Months Ended

Income (loss) before income taxes:

Waste management services

$ 1,035  

$ 1,689  

$ 1,819  

Golf and related operations

( 247 )  

Segment income before income taxes

Corporate interest expense

( 266 )  

( 280 )  

( 535 )  

Corporate gain on debt extinguishment

1 unchanged sentence

General corporate expenses

( 921 )  

( 1,290 )  

( 1,851 )  

Income (loss) before income taxes

$ ( 943 )  

$ 1,470  

Income before income taxes

Gain on debt extinguishment:

2 unchanged sentences

Total gain on debt extinguishment

$ 1,964  

September 30,

Identifiable assets:

Waste management services

$ 34,779  

$ 34,203  

Golf and related operations

64,798  

59,700  

53,975  

55,027  

153,552  

148,930  

Elimination of intersegment receivables

( 73,160 )  

$ 80,392  

$ 78,037  

In comparing total assets at June 30, 2022 with those at December 31, 2021, the increase in the total assets of the waste management services segment of approximately $ 0.6 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 $ 5.1 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, partially offset by current year depreciation on property and equipment.

The decrease in corporate total assets of approximately $ 1.1 million was primarily due to a decrease in 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.

In comparing total assets at September 30, 2022 with those at December 31, 2021, the increase in the total assets of the waste management services segment of approximately $ 1.6 million was primarily a result of an increase accounts receivable partially offset by a decrease in intersegment transactions, which are eliminated in consolidation.

The increase in total assets of the golf and related operations segment of $ 3.8 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 partially offset by current year depreciation on property and equipment.

The increase in corporate total assets of approximately $ 9.2 million was primarily due to an increase in restricted cash received in conjunction with our 2022 Term Loan Agreement and an increase in intersegment transactions, which are eliminated in consolidation, partially offset by a decrease in operating cash and cash equivalents.

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 June 30, 2022 and December 31, 2021, respectively, Avalon owns approximately 47 % of AWMS Holdings, LLC.

At September 30, 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.

2 unchanged sentences

in our Condensed Consolidated Statements of Operations.

During the three months ended June 30, 2022 and 2021, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 10,000 and $ 18,000 , respectively.

During the six months ended June 30, 2022 and 2021, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 72,000 and $ 46,000 , respectively.

During the three and nine months ended September 30, 2022, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 13,000 and $ 85,000 , respectively.

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.

Avalon Med Spa, LLC

8 unchanged sentences

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 at both June 30, 2022 and December 31, 2021.

Avalon is the majority owner of Avalon Med Spa, LLC owning 50.1 % of the company at both September 30, 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.

2 unchanged sentences

in our Condensed Consolidated Statements of Operations.

During the three and six months ended June 30, 2022, net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was approximately $ 70,000 and $ 146,000 , respectively.

During the three and nine months ended September 30, 2022, net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was approximately $ 83,000 and $ 229,000 , respectively.

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 .

Injection Wells Suspension

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Article I, Section 19 of the Ohio Constitution;

and Ohio Revised Code Chapter 163.

On March 18, 2019, Avalon received notice that the 11 th Appellate District Court in Trumbull County, Ohio issued summary judgment in favor of the Ohio Department of Natural Resources in the writ of mandamus action that resulted from the suspension order of the Company’s salt water injection well.

The decision was appealed to the Supreme Court of Ohio on April 5, 2019.

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

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

Oral arguments in the case occurred on April 7, 2020. 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 the case back to that court for a trial on the merits.

6 unchanged sentences

A hearing in this matter occurred in February 2022.

On June 30, 2022, the Oil and Gas Commission rendered their decision for the Division in this matter, once again deferring to the Division in their decision.

On September 30, 2022, the Oil and Gas Commission rendered their decision for the Division in this matter, once again deferring to the Division in their decision.

The Company appealed the decision to the Franklin County Ohio Court of Common Pleas on August 9, 2022.

Subsequent Event

New Term Loan Agreement

On August 5, 2022, 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 $ 31.0 million term loan.

At closing, $ 20.2 million of the proceeds were used to pay off and refinance amounts outstanding and associated interest under our existing term loan agreement with Laurel Capital Corporation and $ 0.4 million of the proceeds were utilized to pay transaction costs.

The existing term loan was 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 twenty-five ( 25 ) year maturity schedule commencing September 5, 2022 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of August 5, 2032.

Upon request by Avalon, project fund proceeds can be utilized to pay debt service.

Borrowings under the New Term Loan Agreement bear interest at a fixed rate of 6.00 % until the seventh anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 6.00% per annum or (b) the sum of the three year treasury rate on the date two ( 2 ) business days prior to the reset date plus 3.40%, provided that the applicable rate shall in no event exceed 8.50% 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.

The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is six percent ( 6 %) on any prepayment in the first five years;

four percent ( 4 %) on any prepayment in the sixth and seventh year;

three percent ( 3 %) on any prepayment in the eighth and ninth year;

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, commencing December 31, 2023.

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

The briefings in this matter are continuing.

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

12 unchanged sentences

Liquidity and Capital Resources

For the six months ended June 30, 2022, Avalon utilized existing cash and cash provided by operations to meet operating needs, fund capital expenditures 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.

Paycheck Protection Program Loan

For the nine months ended September 30, 2022, Avalon utilized existing cash and cash provided by operations to meet operating needs, fund capital expenditures and make required monthly payments on our term loan facility.

Cash in our project fund account and borrowings under our line of credit were also 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.

2022 Term Loan Agreement

At closing, $20.2 million of the proceeds were used to pay off and refinance amounts outstanding and associated interest under our 2019 Term Loan Agreement with Laurel Capital Corporation and $0.4 million of the proceeds were utilized to pay transaction costs.

The remaining proceeds of approximately $10.4 million were deposited into a project fund account for which those proceeds are to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At September 30, 2022, loan proceeds of $10.4 million remained in the project fund account.

The 2019 Term Loan Agreement was terminated in conjunction with the 2022 Term Loan Agreement.

The 2022 Term Loan Agreement is payable in 119 equal monthly installments of principal and interest , based on a twenty-five (25) year maturity schedule which commenced September 5, 2022 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of August 5, 2032.

Upon request by Avalon, project fund proceeds can be utilized to pay debt service.

Borrowings under the 2022 Term Loan Agreement bear interest at a fixed rate of 6.00% until the seventh anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 6.00% per annum or (b) the sum of the three year treasury rate on the date two (2) business days prior to the reset date plus 3.40%, provided that the applicable rate shall in no event exceed 8.50% per annum.

The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is six percent (6%) on any prepayment in the first five years;

four percent (4%) on any prepayment in the sixth and seventh year;

three percent (3%) on any prepayment in the eighth and ninth year;

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

Borrowings under the 2022 Term Loan Agreement are secured by certain real property and related business assets as defined in the agreement.

The 2022 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, 2023.

The 2022 Term Loan also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the 2022 Term Loan Agreement covenants at September 30, 2022.

Paycheck Protection Program Loans

5 unchanged sentences

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 June 30, 2021, approximately $0.9 million of the loans and $9,000 of associated interest were forgiven by the Small Business Administration.

During the six months ended June 30, 2021, approximately $2.0 million of the loans and $17,000 of associated interest were forgiven by the Small Business Administration.

As of June 30, 2021, all loan proceeds received under the Program and related interest were forgiven by the Small Business Administration.

During the nine months ended September 30, 2021, approximately $2.0 million of the loans and $17,000 of associated interest were forgiven by the Small Business Administration.

As of September 30, 2021, all loan proceeds received under the Program and related interest were 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.

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.

Restricted cash in the project fund account was fully utilized at June 30, 2022.

At December 31, 2021, loan proceeds of $1.7 million 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.

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;

four percent (4%) on any prepayment in the sixth and seventh year;

three percent (3%) on any prepayment in the eighth and ninth year;

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

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 June 30, 2022 and December 31, 2021.

New Term Loan Agreement

At closing, $20.2 million of the proceeds were used to pay off and refinance amounts outstanding and associated interest under our existing term loan agreement with Laurel Capital Corporation and $0.4 million of the proceeds were utilized to pay transaction costs.

The remaining proceeds of approximately $10.4 million were deposited into a project fund account for which those proceeds are to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

The existing term loan was 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 twenty-five (25) year maturity schedule commencing September 5, 2022 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of August 5, 2032.

Upon request by Avalon, project fund proceeds can be utilized to pay debt service.

Borrowings under the New Term Loan Agreement bear interest at a fixed rate of 6.00% until the seventh anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 6.00% per annum or (b) the sum of the three year treasury rate on the date two (2) business days prior to the reset date plus 3.40%, provided that the applicable rate shall in no event exceed 8.50% per annum.

The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is six percent (6%) on any prepayment in the first five years;

four percent (4%) on any prepayment in the sixth and seventh year;

three percent (3%) on any prepayment in the eighth and ninth year;

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, commencing December 31, 2023.

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

Line of Credit Agreement

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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 June 30, 2022 and December 31, 2021.

At September 30, 2022, approximately $1.0 million was outstanding under the Line of Credit Agreement.

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

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

At June 30, 2022, the interest rate on the Line of Credit Agreement was 5.00%.

At September 30, 2022, the interest rate on the Line of Credit Agreement was 6.50%.

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 June 30, 2022 and December 31, 2021.

During the three months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00% and 4.92%, respectively.

During the six months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00% and 4.86%, respectively.

Avalon was in compliance with the Line of Credit Agreements covenants at September 30, 2022 and December 31, 2021.

During the three months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.69% and 5.00%, respectively.

During the nine months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.27% and 4.91%, respectively.

Squaw Creek Country Club Lease Agreement

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Capital Expenditures

During the six months ended June 30, 2022, Avalon incurred capital expenditures of $4.4 million of which $3.3 million of such expenditures was paid to vendors during the period.

During the six months ended June 30, 2021, Avalon incurred capital expenditures of $2.1 million of which $1.8 million of such expenditures was paid to vendors during the period.

For both the six months ended June 30, 2022 and 2021, expenditures primarily related to the continued renovation of The Grand Resort and the clubhouse at Avalon Field Club at New Castle.

During the nine months ended September 30, 2022, Avalon incurred capital expenditures of $5.5 million of which $5.3 million of such expenditures was paid to vendors during the period.

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.

For both the nine months ended September 30, 2022 and 2021, expenditures primarily related to the continued renovation of The Grand Resort and the clubhouse at Avalon Field Club at New Castle.

In 2022 and 2021, The Grand Resort was in operation but certain existing hotel rooms were in the process of being renovated.

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Working Capital

At June 30, 2022 and December 31, 2021, there was a working capital deficit of approximately $4.6 million and $2.1 million, respectively.

Working capital was negatively impacted by an increase in deferred membership dues revenue, accounts payable and accrued payroll.

The negative impact was partially offset by an increase in accounts receivable, unbilled membership dues receivable and inventory.

Accounts receivable increased to $10.5 million at June 30, 2022 compared with $9.9 million at December 31, 2021.

Accounts receivable related to the golf and related operations segment increased approximately $1.5 million at June 30, 2022 compared to December 31, 2021 due to the associated timing of annual membership renewals.

The increase in accounts receivable related to our golf and related operations segment was partially offset by a decrease in accounts receivable related to our waste management services segment.

Accounts receivable related to our waste management services segment decreased approximately $0.9 million at June 30, 2022 compared with December 31, 2021 as a result of the decrease in net operating revenues in the second quarter of 2022 compared with the fourth quarter of 2021 and the timing of receipt on those associated receivables.

Unbilled membership dues receivable was approximately $1.1 million at June 30, 2022 compared to $0.6 million at December 31, 2021.

At September 30, 2022 and December 31, 2021, there was a working capital deficit of approximately $2.0 million and $2.1 million, respectively.

Working capital was positively impacted by an increase in accounts receivable, unbilled membership dues receivable and inventory and a decrease in the current portion due on the term loan agreement.

The positive impact was partially offset by an increase in deferred membership dues revenue, accounts payable, accrued payroll and a decrease in operating cash and cash equivalents.

Accounts receivable increased to $13.4 million at September 30, 2022 compared with $9.9 million at December 31, 2021.

Accounts receivable related to our waste management services segment increased approximately $2.9 million at September 30, 2022 compared with December 31, 2021 as a result of the increase in net operating revenues in the third quarter of 2022 compared with the fourth quarter of 2021 and the timing of receipt on those associated receivables.

Accounts receivable related to the golf and related operations segment increased approximately $0.6 million at September 30, 2022 compared to December 31, 2021 due to the associated timing of annual membership renewals.

Unbilled membership dues receivable was approximately $0.9 million at September 30, 2022 compared to $0.6 million at December 31, 2021.

The increase was primarily due to the timing of annual membership renewals related to the Avalon Golf and Country Club and associated monthly billing over the course of the annual agreement.

Inventory was approximately $1.5 million at June 30, 2022 compared to $1.1 million at December 31, 2021.

Inventory was approximately $1.5 million at September 30, 2022 compared to $1.1 million at December 31, 2021.

The increase is related to merchandise, food and beverage inventory as a result of the increase in business operations for our golf and related operations segment.

Accounts payable was approximately $11.0 million at June 30, 2022 compared to $10.2 million at December 31, 2021.

Accounts payable related to the golf and related operations increased as a result of unpaid construction bills at June 30, 2022 related to The Grand Resort and Avalon Field Club at New Castle.

The increase in accounts payable related to our golf and related operations segment was partially offset by a decrease in accounts payable related to our waste management services segment.

Accounts payable related to our waste management segment decreased as a result of a decrease in amounts due to disposal facilities and transportation carriers in the second quarter of 2022 compared to the fourth quarter of 2021 and the associated timing of those vendor payments in the ordinary course of business.

Deferred revenue relating to membership dues was approximately $5.8 million at June 30, 2022 compared to $3.4 million at December 31, 2021.

Accounts payable was approximately $11.0 million at September 30, 2022 compared to $10.2 million at December 31, 2021.

The increase in accounts payable between periods was primarily due to the waste management segment.

Accounts payable related to our waste management segment increased as a result of an increase in amounts due to disposal facilities and transportation carriers in the third quarter of 2022 compared to the fourth quarter of 2021 and the associated timing of those vendor payments in the ordinary course of business.

Deferred revenue relating to membership dues was approximately $4.6 million at September 30, 2022 compared to $3.4 million at December 31, 2021.

The increase in deferred revenues was primarily due to the associated timing of annual membership renewals and, to a lesser extent, an increase in membership dues rates during 2022.

Accrued payroll and other compensation was approximately $1.7 million at June 30, 2022 compared to $0.8 million at December 31, 2021.

The increase is primarily due to the associated timing of employee payroll payments in the ordinary course of business related to our golf and related operations.

Accrued payroll and other compensation was approximately $1.5 million at September 30, 2022 compared to $0.8 million at December 31, 2021.

The increase is primarily due to the associated timing of employee payroll payments in the ordinary course of business related to our golf and related operations and the timing of payment of certain earned employee incentives.

Management believes that anticipated cash provided from future operations will be sufficient to meet operating requirements and make required monthly payments under our term loan facility.

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Avalon’s primary business segment, the waste management services segment, provides hazardous and nonhazardous waste brokerage and management services, captive landfill management services and salt water injection well operations.

The golf and related operations segment includes the operation and management of four golf courses and related country clubs and facilities, a hotel and its associated resort amenities, a multipurpose recreation center and a travel agency.

Performance in the second quarter of 2022 compared with the second quarter of 2021

Performance in the third quarter of 2022 compared with the third quarter of 2021

Overall Performance

Net operating revenues increased to $19.5 million in the second quarter of 2022 compared with $16.4 million in the second quarter of 2021.

Net operating revenues of the waste management services segment were approximately $10.7 million in the second quarter of 2022 compared to $8.7 million in the second quarter of 2021.

The increase in net operating revenues of the waste management services segment was a result of an increase in both continuous and event work projects during the second quarter of 2022 compared to the second quarter of 2021.

Net operating revenues of the golf and related operations segment were approximately $8.8 million in the second quarter of 2022 compared to $7.7 million in the second quarter of 2021.

The increase in net operating revenues of the golf and related operations was a result of increased business operations related to both The Grand Resort and the country clubs during the second quarter of 2022 compared to the second quarter of 2021.

Total cost of operations related to the waste management services segment increased to $8.5 million in the second quarter of 2022 compared with $7.0 million in the second quarter of 2021.

Net operating revenues increased to $25.7 million in the third quarter of 2022 compared with $21.3 million in the third quarter of 2021.

Net operating revenues of the waste management services segment were approximately $15.0 million in the third quarter of 2022 compared to $11.4 million in the third quarter of 2021.

The increase in net operating revenues of the waste management services segment was a result of an increase in both continuous and event work projects during the third quarter of 2022 compared to the third quarter of 2021.

Net operating revenues of the golf and related operations segment were approximately $10.7 million in the third quarter of 2022 compared to $9.9 million in the third quarter of 2021.

The increase in net operating revenues of the golf and related operations was a result of increased business operations related to both The Grand Resort and the country clubs during the third quarter of 2022 compared to the third quarter of 2021.

Total cost of operations related to the waste management services segment increased to $12.2 million in the third quarter of 2022 compared with $9.4 million in the third quarter of 2021.

The increase in the cost of operations between periods for the waste management services segment is primarily due to the increased net operating revenues as these costs vary directly with the associated revenues.

Total cost of operations related to the golf and related operations segment increased to $7.3 million in the second quarter of 2022 compared to $6.1 million in the second quarter of 2021.

The increase between periods was primarily a result of higher product costs and employee related costs associated with an increase in business operations and wage increases during the period.

Depreciation and amortization expense was approximately $0.8 million in both the second quarter of 2022 and 2021.

Consolidated selling, general and administrative expenses were approximately $2.3 million in the second quarter of 2022 compared to $2.5 million in the second quarter of 2021.

In the second quarter of 2021, certain discretionary employee bonuses were paid by the Company.

Gain on debt extinguishment was approximately $0.9 million in the second quarter of 2021 representing the Paycheck Protection Program loans that were forgiven by the Small Business Administration received under the CARES Act.

Interest expense was approximately $0.3 million in both the second quarter of 2022 and 2021.

During the second quarter of 2022, the decrease in interest expense due to the lower average outstanding debt was offset by a higher weighted average interest rate on the outstanding borrowings.

During the three months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00% and 4.92%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $0.5 million, or $0.12 per share, in the second quarter of 2022 compared with net income attributable to Avalon Holdings Corporation common shareholders of $0.7 million, or $0.19 per share, in the second quarter of 2021.

Total cost of operations related to the golf and related operations segment increased to $8.2 million in the third quarter of 2022 compared to $7.3 million in the third quarter of 2021.

The increase between periods was primarily a result of higher employee related costs associated with an increase in business operations and wage increases during the period.

Depreciation and amortization expense was approximately $0.9 million in the third quarter of 2022 compared to $0.8 million in the third quarter of 2021.

The increase is due to a higher depreciable asset base primarily related to the renovation of The Avalon Field Club at New Castle and The Grand Resort and equipment purchases for the med spa.

Consolidated selling, general and administrative expenses were approximately $2.9 million in the third quarter of 2022 compared to $2.7 million in the third quarter of 2021.

The increase was primarily due to higher employee related costs.

Interest expense was approximately $0.4 million in the third quarter of 2022 compared to $0.3 million in the third quarter of 2021.

During the third quarter of 2022, the increase in interest expense was due to both the higher average debt outstanding and the increased weighted average interest rate on the associated borrowings.

During the three months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.69% and 5.00%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $1.2 million, or $0.30 per share, in the third quarter of 2022 compared with net income attributable to Avalon Holdings Corporation common shareholders of $1.0 million, or $0.25 per share, in the third quarter of 2021.

Segment Performance

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Waste Management Services Segment

The net operating revenues of the waste management services segment increased to $10.7 million in the second quarter of 2022 compared with $8.7 million in the second quarter of 2021.

The net operating revenues of the waste management services segment increased to $15.0 million in the third quarter of 2022 compared with $11.4 million in the third quarter of 2021.

The waste management services segment includes waste disposal brokerage and management services, captive landfill management operations and salt water injection well operations.

The net operating revenues of the waste disposal brokerage and management services business were approximately $10.0 million in the second quarter of 2022 compared to $8.1 million in the second quarter of 2021.

The net operating revenues of the waste disposal brokerage and management services business were approximately $14.3 million in the third quarter of 2022 compared to $10.8 million in the third quarter of 2021.

Continuous work of the waste disposal brokerage business increased approximately $1.0 million between periods as a result of increased work from multiple customers.

Net operating revenues related to continuous work were approximately $6.5 million in the second quarter of 2022 compared with $4.8 million in the second quarter of 2021.

In addition, event work net operating revenues related to multiple projects increased by approximately $0.2 million during second quarter of 2022 when compared to second quarter of 2021.

Net operating revenues related to continuous work were approximately $6.4 million in the third quarter of 2022 compared with $5.4 million in the third quarter of 2021.

In addition, event work net operating revenues related to multiple projects increased by approximately $2.5 million during third quarter of 2022 when compared to third quarter of 2021.

Event work is defined as bid projects under contract that occurs on a one-time basis over a short period of time.

Such work can fluctuate significantly from period to period.

Event work net operating revenues were approximately $3.5 million in the second quarter of 2022 compared with $3.3 million in the second quarter of 2021.

The net operating revenues of the captive landfill management operations were approximately $0.7 million in the second quarter of 2022 compared to $0.6 million in the second quarter of 2021.

Event work net operating revenues were approximately $7.9 million in the third quarter of 2022 compared with $5.4 million in the third quarter of 2021.

The net operating revenues of the captive landfill management operations were approximately $0.7 million in the third quarter of 2022 compared to $0.6 million in the third quarter of 2021.

The net operating revenues of the captive landfill operations are almost entirely dependent upon the volume of waste generated by the owner of the landfill for whom Avalon manages the facility.

Costs of operations related to the waste management services segment increased to $8.5 million in the second quarter of 2022 compared with $7.0 million in the second quarter of 2021.

Costs of operations related to the waste management services segment increased to $12.2 million in the third quarter of 2022 compared with $9.4 million in the third quarter of 2021.

The increase in the cost of operations between periods for the waste management segment is primarily due to the increased net operating revenues as these costs vary directly with the associated revenues.

The overall gross margin percentage of the waste brokerage and management services business was approximately 21% in the second quarter of 2022 compared to 20% in the second quarter of 2021.

The increase in the overall gross margin percentage was primarily attributable to the higher gross profit generated from event work projects during second quarter of 2022.

Income before income taxes for the waste management services segment were approximately $1.0 million in the second quarter of 2022 compared to $0.7 million in the second quarter of 2021.

Income before income taxes of the waste brokerage and management services business was approximately $1.0 million in the second quarter of 2022 compared to $0.6 million in the second quarter of 2021.

The increased income before income taxes was primarily attributable to the increased net operating revenues and associated higher gross profit during the second quarter of 2022 compared to the second quarter of 2021.

Income before income taxes of the captive landfill operations were approximately $0.1 million in both the second quarter of 2022 and 2021.

During both the second quarter of 2022 and 2021, the salt water injection wells incurred a loss before income taxes of less than $0.1 million primarily due to legal and professional costs incurred relating to Avalon’s mandamus processes.

The overall gross margin percentage of the waste brokerage and management services business was approximately 19% in the third quarter of 2022 compared to 18% in the third quarter of 2021.

The increase in the overall gross margin percentage was primarily attributable to the higher gross profit generated from event work projects during third quarter of 2022.

Income before income taxes for the waste management services segment were approximately $1.5 million in the third quarter of 2022 compared to $0.7 million in the third quarter of 2021.

Income before income taxes of the waste brokerage and management services business was approximately $1.4 million in the third quarter of 2022 compared to $0.9 million in the third quarter of 2021.

The increased income before income taxes was primarily attributable to the increased net operating revenues and associated higher gross profit during the third quarter of 2022 compared to the third quarter of 2021.

Income before income taxes of the captive landfill operations were approximately $0.1 million in both the third quarter of 2022 and 2021.

During the third quarter of 2022 and 2021, the salt water injection wells incurred a loss before income taxes of less than $0.1 million and $0.3 million, respectively, primarily due to legal and professional costs incurred relating to Avalon’s appeal and mandamus processes.

Golf and Related Operations Segment

Net operating revenues of the golf and related operations segment were approximately $8.8 million in the second quarter of 2022 compared to $7.7 million in the second quarter of 2021.

Avalon’s golf and related operations segment consists of the operation and management of four golf courses and related country clubs which provide dining and banquet facilities, a hotel which provides lodging, dining, banquet and conference facilities and other resort related amenities, a multipurpose recreation center and a travel agency.

Food, beverage and merchandise sales increased to approximately $3.6 million in the second quarter of 2022 compared to $3.3 million in the second quarter of 2021.

Net operating revenues of the golf and related operations segment were approximately $10.7 million in the third quarter of 2022 compared to $9.9 million in the third quarter of 2021.

Food, beverage and merchandise sales increased to approximately $4.1 million in the third quarter of 2022 compared to $4.0 million in the third quarter of 2021.

Food, beverage and merchandise sales increased between periods as a result of an increase in business activity at both The Grand Resort and the country clubs.

Other net operating revenues related to the golf and related operations were approximately $5.2 million in the second quarter of 2022 compared to $4.4 million in the second quarter of 2021.

Membership dues revenue was approximately $1.8 million in the second quarter of 2022 compared to $1.7 million in the second quarter of 2021.

The increase in membership dues revenue was attributable to an increase in membership dues rates.

Net operating revenues related to room rental was approximately $1.5 million in the second quarter of 2022 compared to $1.1 million in the second quarter of 2021.

Other net operating revenues related to the golf and related operations were approximately $6.6 million in the third quarter of 2022 compared to $5.9 million in the third quarter of 2021.

Membership dues revenue was approximately $1.8 million in the third quarter of 2022 compared to $1.7 million in the third quarter of 2021.

The increase in membership dues revenue was attributable to an increase in membership dues rates partially offset by a slight decrease in the average number of members during the period.

Net operating revenues related to room rental was approximately $2.2 million in the third quarter of 2022 compared to $1.8 million in the third quarter of 2021.

The increase in room revenue was a result of both higher occupancy and an increase in average room rates when compared to the prior period.

Greens fees and associated cart rentals were approximately $0.9 million in both the second quarter of 2022 and 2021.

Other revenues consisting of athletic, fitness, travel agency, salon and spa related activities were approximately $1.0 million in the second quarter of 2022 compared to $0.7 million in the second quarter of 2021.

The increase between periods was primarily due to an increase in salon and spa revenue associated with The Grand Resort.

Total cost of operations for the golf and related operations segment were $7.3 million in the second quarter of 2022 compared with $6.1 million in the second quarter of 2021.

Cost of food, beverage and merchandise was approximately $1.5 million in the second quarter of 2022 compared to $1.3 million in the second quarter of 2021.

The increase in total food, beverage and merchandise costs between periods is primarily due to higher revenues from increased business operations and higher product costs.

The cost of food, beverage and merchandise sales was approximately 43% of associated revenue in the second quarter of 2022 compared to 41% in the second quarter of 2021.

Golf and related operations operating costs increased to approximately $5.7 million in the second quarter of 2022 compared with $4.7 million in the second quarter of 2021.

The increase in operating costs between periods, primarily employee related costs, was directly attributable to both an increase in business operations and higher employee wages paid per hour during the second quarter of 2022 compared to the second quarter of 2021.

The golf and related operations recorded income before income taxes of $0.6 million in the second quarter of 2022 compared with income before income taxes of $1.6 million in the second quarter of 2021.

The change between periods was primarily a result of higher employee related costs in the second quarter of 2022 and, in the second quarter of 2021, the golf and related operations recorded a gain on debt extinguishment of approximately $0.9 million representing the Paycheck Protection Program loan that was forgiven by the Small Business Administration received under the CARES Act.

Greens fees and associated cart rentals were approximately $1.6 million in the third quarter of 2022 compared to $1.5 million in the third quarter of 2021.

The increase was primarily due to an increase in cart rental rates during the period.

Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $1.0 million in the third quarter of 2022 compared to $0.9 million in the third quarter of 2021.

The increase between periods was primarily due to an increase in salon and spa revenue.

Total cost of operations for the golf and related operations segment were $8.2 million in the third quarter of 2022 compared with $7.3 million in the third quarter of 2021.

Cost of food, beverage and merchandise was approximately $1.7 million in the third quarter of 2022 compared to $1.6 million in the third quarter of 2021.

The increase in total food, beverage and merchandise costs between periods is primarily due to higher revenues from increased business operations.

The cost of food, beverage and merchandise sales was approximately 42% of associated revenue in both the third quarter of 2022 and 2021.

Golf and related operations operating costs increased to approximately $6.5 million in the third quarter of 2022 compared with $5.7 million in the third quarter of 2021.

The increase in operating costs between periods, primarily employee related costs, was directly attributable to both an increase in business operations and higher employee wages paid per hour during the third quarter of 2022 compared to the third quarter of 2021.

The golf and related operations recorded income before income taxes of $1.2 million in the third quarter of 2022 compared with income before income taxes of $1.4 million in the third quarter of 2021.

The change between periods was primarily a result of higher employee related costs in the third quarter of 2022.

General Corporate Expenses

General corporate expenses were $0.9 million in the second quarter of 2022 compared to $1.3 million in the second quarter of 2021.

In the second quarter of 2021, certain discretionary employee bonuses were paid by the Company.

Gain on Debt Extinguishment

General corporate expenses were $1.1 million in the third quarter of 2022 compared to $1.0 million in the third quarter of 2021.

The increase was attributable to higher legal and professional fees related to the term loan refinancing.

Interest Expense

Interest expense was approximately $0.3 million in both second quarter of 2022 and 2021.

During second quarter of 2022, the decrease in interest expense due to the lower average outstanding debt was offset by a higher weighted average interest rate on the outstanding borrowings.

During the three months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00% and 4.92%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $0.5 million in the second quarter of 2022 compared to net income attributable to Avalon Holdings Corporation common shareholders of $0.7 million in the second quarter of 2021.

Avalon recorded a state income tax provision in both the second quarter of 2022 and 2021, which was related entirely to the waste management and brokerage operations.

Interest expense was approximately $0.4 million in the third quarter of 2022 compared to $0.3 million in the third quarter of 2021.

During the third quarter of 2022, the increase in interest expense was due to both the higher average debt outstanding and the increased weighted average interest rate on the associated borrowings.

During the three months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.69% and 5.00%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $1.2 million in the third quarter of 2022 compared to net income attributable to Avalon Holdings Corporation common shareholders of $1.0 million in the third quarter of 2021.

Avalon recorded a state income tax provision in both the third quarter of 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 reflect taxes owed in certain U.S state jurisdictions.

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Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Performance in the first six months of 2022 compared with the first six months of 2021

Performance in the first nine months of 2022 compared with the first nine months of 2021

Overall Performance

Net operating revenues increased to $33.8 million in the first six months of 2022 compared with $31.5 million in the first six months of 2021.

Net operating revenues of the waste management services segment were approximately $20.0 million in the first six months of 2022 compared to $19.8 million in the first six months of 2021.

The increase in net operating revenues of the waste management services segment was a result of an increase in continuous work partially offset by a decrease in event work projects during the first six months of 2022 compared to the first six months of 2021.

Net operating revenues of the golf and related operations segment were approximately $13.8 million in the first six months of 2022 compared to $11.7 million in the first six months of 2021.

The increase in net operating revenues of the golf and related operations was a result of increased business operations related to both The Grand Resort and the country clubs during the first six months of 2022 compared to the first six months of 2021.

Total cost of operations related to the waste management services segment increased to $16.1 million in the first six months of 2022 compared with $15.7 million in the first six months of 2021.

The increase in the cost of operations between periods for the waste management services segment is primarily due to higher waste disposal transportation expense.

Total cost of operations related to the golf and related operations segment increased to $12.1 million in the first six months of 2022 compared to $9.6 million in the first six months of 2021.

Net operating revenues increased to $59.5 million in the first nine months of 2022 compared with $52.8 million in the first nine months of 2021.

Net operating revenues of the waste management services segment were approximately $35.1 million in the first nine months of 2022 compared to $31.3 million in the first nine months of 2021.

The increase in net operating revenues of the waste management services segment was a result of an increase in both continuous and event work projects during the first nine months of 2022 compared to the first nine months of 2021.

Net operating revenues of the golf and related operations segment were approximately $24.4 million in the first nine months of 2022 compared to $21.5 million in the first nine months of 2021.

The increase in net operating revenues of the golf and related operations was a result of increased business operations related to both The Grand Resort and the country clubs during the first nine months of 2022 compared to the first nine months of 2021.

Total cost of operations related to the waste management services segment increased to $28.2 million in the first nine months of 2022 compared with $25.1 million in the first nine months of 2021.

The increase in the cost of operations between periods for the waste management services segment is primarily due to increased net operating revenues as these costs vary directly with the associated revenues.

Total cost of operations related to the golf and related operations segment increased to $20.3 million in the first nine months of 2022 compared to $17.0 million in the first nine months of 2021.

The increase between periods was primarily a result of higher product costs and employee related costs associated with an increase in business operations and wage increases during the period.

Depreciation and amortization expense was approximately $1.7 million in the first six months of 2022 compared to $1.5 million in the first six months of 2021.

The increase is due to the higher depreciable asset base primarily due to the renovation and expansion of The Grand Resort.

Consolidated selling, general and administrative expenses were approximately $4.6 million in the first six months of 2022 compared to $4.8 million in the first six months of 2021.

In the first six months of 2021, certain discretionary employee bonuses were paid by the Company.

Gain on debt extinguishment was approximately $2.0 million in the first six months of 2021 representing the Paycheck Protection Program loans that were forgiven by the Small Business Administration received under the CARES Act.

Interest expense was approximately $0.6 million in both the first six months of 2022 and 2021.

During the first six months of 2022, the decrease in interest expense due to the lower average outstanding debt was offset by a higher weighted average interest rate on the outstanding borrowings.

During the six months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00% and 4.86%, respectively.

Net loss attributable to Avalon Holdings Corporation common shareholders was $0.8 million, or $0.20 per share, in the first six months of 2022 compared with net income attributable to Avalon Holdings Corporation common shareholders of $1.5 million, or $0.37 per share, in the first six months of 2021.

Depreciation and amortization expense was approximately $2.6 million in the first nine months of 2022 compared to $2.3 million in the first nine months of 2021.

The increase is due to a higher depreciable asset base primarily related to the renovation of The Avalon Field Club at New Castle and The Grand Resort and equipment purchases for the med spa.

Consolidated selling, general and administrative expenses were approximately $7.5 million in the first nine months of 2022 compared to $7.6 million in the first nine months of 2021.

The decrease was primarily attributable to lower discretionary employee bonuses paid during the period.

Gain on debt extinguishment was approximately $2.0 million in the first nine months of 2021 representing the Paycheck Protection Program loans that were forgiven by the Small Business Administration received under the CARES Act.

Interest expense was approximately $1.0 million in the first nine months of 2022 compared to $0.9 million in the first nine months of 2021.

During the first nine months of 2022, the increase in interest expense was due to both the higher average debt outstanding and the increased weighted average interest rate on the associated borrowings.

During the nine months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.27% and 4.91%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $0.4 million, or $0.10 per share, in the first nine months of 2022 compared with net income attributable to Avalon Holdings Corporation common shareholders of $2.4 million, or $0.63 per share, in the first nine months of 2021.

Segment Performance

1 unchanged sentence

Waste Management Services Segment

The net operating revenues of the waste management services segment increased to $20.0 million in the first six months of 2022 compared with $19.8 million in the first six months of 2021.

The net operating revenues of the waste disposal brokerage and management services business were approximately $18.7 million in the first six months of 2022 compared to $18.6 million in the first six months of 2021.

The net operating revenues of the waste management services segment increased to $35.1 million in the first nine months of 2022 compared with $31.3 million in the first nine months of 2021.

The net operating revenues of the waste disposal brokerage and management services business were approximately $33.1 million in the first nine months of 2022 compared to $29.5 million in the first nine months of 2021.

Continuous work of the waste disposal brokerage business increased approximately $1.4 million between periods as a result of increased work from multiple customers.

Net operating revenues related to continuous work were approximately $12.1 million in the first six months of 2022 compared with $11.7 million in the first six months of 2021.

The increase in net operating revenues from continuous work was partially offset by a decrease in event work projects.

Event work net operating revenues related to multiple projects decreased by approximately $0.3 million during first six months of 2022 when compared to first six months of 2021.

Net operating revenues related to continuous work were approximately $18.6 million in the first nine months of 2022 compared with $17.2 million in the first nine months of 2021.

In addition, event work net operating revenues related to multiple projects increased by approximately $2.2 million during first nine months of 2022 when compared to first nine months of 2021.

Event work is defined as bid projects under contract that occurs on a one-time basis over a short period of time.

Such work can fluctuate significantly from year to year.

Event work net operating revenues were approximately $6.6 million in the first six months of 2022 compared with $6.9 million in the first six months of 2021.

The net operating revenues of the captive landfill management operations were approximately $1.3 million in the first six months of 2022 compared to $1.2 million in the first six months of 2021.

Event work net operating revenues were approximately $14.5 million in the first nine months of 2022 compared with $12.3 million in the first nine months of 2021.

The net operating revenues of the captive landfill management operations were approximately $2.0 million in the first nine months of 2022 compared to $1.8 million in the first nine months of 2021.

The net operating revenues of the captive landfill operations are almost entirely dependent upon the volume of waste generated by the owner of the landfill for whom Avalon manages the facility.

Costs of operations related to the waste management services segment increased to $16.1 million in the first six months of 2022 compared with $15.7 million in the first six months of 2021.

The increase in the cost of operations between periods for the waste management services segment is primarily due to higher waste disposal transportation expense.

The overall gross margin percentage of the waste brokerage and management services business was approximately 20% in the first six months of 2022 compared to 21% in the first six months of 2021.

The decrease in the overall gross margin percentage was primarily attributable to the lower gross profit generated from both continuous and event work projects during first six months of 2022.

Income before income taxes for the waste management services segment were approximately $1.7 million in the first six months of 2022 compared to $1.8 million in the first six months of 2021.

Income before income taxes of the waste brokerage and management services business was approximately $1.7 million in the first six months of 2022 compared to $1.8 million in the first six months of 2021.

The decreased income before income taxes was primarily attributable to the lower gross profit during the first six months of 2022 compared to the first six months of 2021.

Income before income taxes of the captive landfill operations were approximately $0.1 million in both the first six months of 2022 and 2021.

During both the first six months of 2022 and 2021, the salt water injection wells incurred a loss before income taxes of approximately $0.1 million primarily due to legal and professional costs incurred relating to Avalon’s mandamus processes.

Costs of operations related to the waste management services segment increased to $28.2 million in the first nine months of 2022 compared with $25.1 million in the first nine months of 2021.

The overall gross margin percentage of the waste brokerage and management services business was approximately 20% in both the first nine months of 2022 and 2021. 

Income before income taxes for the waste management services segment were approximately $3.1 million in the first nine months of 2022 compared to $2.5 million in the first nine months of 2021.

Income before income taxes of the waste brokerage and management services business was approximately $3.1 million in the first nine months of 2022 compared to $2.6 million in the first nine months of 2021.

The increased income before income taxes was primarily attributable to the increased net operating revenues and associated higher gross profit during the first nine months of 2022 compared to the first nine months of 2021.

Income before income taxes of the captive landfill operations were approximately $0.1 million in the first nine months of 2022 compared to $0.2 million in the first nine months of 2021.

The decrease was due to higher fuel expense and employee costs.

During both the first nine months of 2022 and 2021, the salt water injection wells incurred a loss before income taxes of approximately $0.1 million and $0.3 million, respectively, primarily due to legal and professional costs incurred relating to Avalon’s appeal and mandamus processes.

Golf and Related Operations Segment

Net operating revenues of the golf and related operations segment were approximately $13.8 million in the first six months of 2022 compared to $11.7 million in the first six months of 2021.

Food, beverage and merchandise sales increased to approximately $5.2 million in the first six months of 2022 compared to $4.6 million in the first six months of 2021.

Net operating revenues of the golf and related operations segment were approximately $24.4 million in the first nine months of 2022 compared to $21.5 million in the first nine months of 2021.

Food, beverage and merchandise sales increased to approximately $9.3 million in the first nine months of 2022 compared to $8.6 million in the first nine months of 2021.

Food, beverage and merchandise sales increased between periods as a result of an increase in business activity at both The Grand Resort and the country clubs.

Other net operating revenues related to the golf and related operations were approximately $8.6 million in the first six months of 2022 compared to $7.1 million in the first six months of 2021.

Membership dues revenue was approximately $3.5 million in the first six months of 2022 compared to $3.3 million in the first six months of 2021.

The increase in membership dues revenue was attributable to both an increase in membership dues rates and the average number of members between periods.

Net operating revenues related to room rental was approximately $2.2 million in the first six months of 2022 compared to $1.6 million in the first six months of 2021.

Other net operating revenues related to the golf and related operations were approximately $15.1 million in the first nine months of 2022 compared to $12.9 million in the first nine months of 2021.

Membership dues revenue was approximately $5.3 million in the first nine months of 2022 compared to $5.0 million in the first nine months of 2021.

The increase in membership dues revenue was attributable to an increase in membership dues rates partially offset by a slight decrease in the average number of members during the period.

Net operating revenues related to room rental was approximately $4.3 million in the first nine months of 2022 compared to $3.4 million in the first nine months of 2021.

The increase in room revenue was a result of both higher occupancy and an increase in average room rates when compared to the prior period.

Other revenues consisting of athletic, fitness, travel agency, salon and spa related activities were approximately $1.9 million in the first six months of 2022 compared to $1.2 million in the first six months of 2021.

The increase between periods was primarily due to an increase in salon and spa revenue associated with The Grand Resort.

Greens fees and associated cart rentals were approximately $1.0 million in both the first six months of 2022 and 2021.

Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $2.9 million in the first nine months of 2022 compared to $2.0 million in the first nine months of 2021.

The increase between periods was primarily due to an increase in salon and spa revenue.

Greens fees and associated cart rentals were approximately $2.6 million in the first nine months of 2022 compared to $2.5 million in the first nine months of 2021.

The increase was primarily due to an increase in cart rental rates during the period.

Total cost of operations for the golf and related operations segment were $12.1 million in the first six months of 2022 compared with $9.6 million in the first six months of 2021.

Cost of food, beverage and merchandise was approximately $2.3 million in the first six months of 2022 compared to $1.9 million in the first six months of 2021.

Total cost of operations for the golf and related operations segment were $20.3 million in the first nine months of 2022 compared with $17.0 million in the first nine months of 2021.

Cost of food, beverage and merchandise was approximately $4.0 million in the first nine months of 2022 compared to $3.6 million in the first nine months of 2021.

The increase in total food, beverage and merchandise costs between periods is primarily due to higher revenues from increased business operations, and to a lesser extent, higher product costs.

The cost of food, beverage and merchandise sales was approximately 43% of associated revenue in the first six months of 2022 compared to 42% in the first six months of 2021.

Golf and related operations operating costs increased to approximately $9.8 million in the first six months of 2022 compared with $7.7 million in the first six months of 2021.

The increase in operating costs between periods, primarily employee related costs, was directly attributable to both an increase in business operations and higher employee wages paid per hour during the first six months of 2022 compared to the first six months of 2021.

The golf and related operations recorded a loss before income taxes of $0.2 million in the first six months of 2022 compared with income before income taxes of $1.8 million in the first six months of 2021.

The change between periods was primarily a result of higher employee related costs in the first six months of 2022 and, in the first six months of 2021, the golf and related operations recorded a gain on debt extinguishment of approximately $1.5 million representing the Paycheck Protection Program loan that was forgiven by the Small Business Administration received under the CARES Act.

The cost of food, beverage and merchandise sales was approximately 43% of associated revenue in the first nine months of 2022 compared to 42% in the first nine months of 2021.

Golf and related operations operating costs increased to approximately $16.3 million in the first nine months of 2022 compared with $13.4 million in the first nine months of 2021.

The increase in operating costs between periods, primarily employee related costs, was directly attributable to both an increase in business operations and higher employee wages paid per hour during the first nine months of 2022 compared to the first nine months of 2021.

The golf and related operations recorded income before income taxes of $1.0 million in the first nine months of 2022 compared with income before income taxes of $3.2 million in the first nine months of 2021.

The change between periods was primarily a result of higher employee related costs in the first nine months of 2022 and, in the first nine months of 2021, the golf and related operations recorded a gain on debt extinguishment of approximately $1.5 million representing the Paycheck Protection Program loan that was forgiven by the Small Business Administration received under the CARES Act.

The ability to attract new members and retain members is very important to the success of the golf and related operations segment.

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General Corporate Expenses

General corporate expenses were $1.9 million in the first six months of 2022 compared to $2.1 million in the first six months of 2021.

In the first six months of 2021, certain discretionary employee bonuses were paid by the Company.

General corporate expenses were $3.0 million in the first nine months of 2022 compared to $3.1 million in the first nine months of 2021.

The decrease was attributable to lower discretionary employee bonuses paid during the period partially offset by higher legal and professional fees related to the term loan refinancing.

Gain on Debt Extinguishment

Interest Expense

Interest expense was approximately $0.6 million in both first six months of 2022 and 2021.

During first six months of 2022, the decrease in interest expense due to the lower average outstanding debt was offset by a higher weighted average interest rate on the outstanding borrowings.

During the six months ended June 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.00% and 4.86%, respectively.

Net Income (Loss)

Net loss attributable to Avalon Holdings Corporation common shareholders was $0.8 million in the first six months of 2022 compared to net income attributable to Avalon Holdings Corporation common shareholders of $1.5 million in the first six months of 2021.

Avalon recorded a state income tax provision in both the first six months of 2022 and 2021, which was related entirely to the waste management and brokerage operations.

Interest expense was approximately $1.0 million in the first nine months of 2022 compared to $0.9 million in the first nine months of 2021.

During the nine months ended September 30, 2022 and 2021, the weighted average interest rate on outstanding borrowings was 5.27% and 4.91%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $0.4 million in the first nine months of 2022 compared to net income attributable to Avalon Holdings Corporation common shareholders of $2.4 million in the first nine months of 2021.

Avalon recorded a state income tax provision in both the first nine months of 2022 and 2021, which was related entirely to the waste management and brokerage operations.

Avalon’s income tax on the income (loss) before taxes was offset by a change in the valuation allowance.

Avalon’s income tax on the income before taxes was offset by a change in the valuation allowance.

A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized.

15 unchanged sentences

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 June 30, 2021, approximately $0.9 million of the loans and $9,000 of associated interest were forgiven by the Small Business Administration.

During the six months ended June 30, 2021, approximately $2.0 million of the loans and $17,000 of associated interest were forgiven by the Small Business Administration.

As of June 30, 2021, all loan proceeds received under the Program and related interest were forgiven by the Small Business Administration.

During the nine months ended September 30, 2021, approximately $2.0 million of the loans and $17,000 of associated interest were forgiven by the Small Business Administration.

As of September 30, 2021, all loan proceeds received under the Program and related interest were 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.

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Unfavorable general economic conditions could adversely affect our business and financial results

Our operations are substantially affected by economic conditions, including inflationary pressures, which can impact consumer disposable income levels and spending habits.

Our operations are substantially affected by economic conditions, including inflation, which can impact consumer disposable income levels and spending habits.

Economic conditions can also be impacted by a variety of factors including epidemics, pandemics and actions taken by governments to manage economic matters, whether through initiatives intended to control wages, unemployment, inflation, taxation and other economic drivers.

Adverse economic conditions could pressure Avalon’s business and operating performance and financial results may suffer.

Global conflict, increasing tensions between the United States and Russia, and other effects of the ongoing conflict in Ukraine, could negatively impact our business, results of operations and financial condition

Global conflict could increase costs and limit availability of fuel, energy, and other resources we depend upon for our business operations.

For example, while we do not operate in Russia or Ukraine, the increasing tensions between the United States and Russia and the other effects of the ongoing conflict in Ukraine, have resulted in many broader economic impacts such as the United States imposing sanctions and bans against Russia and Russian products imported into the United States.

Such sanctions and bans have impacted and may continue to impact commodity pricing such as fuel and energy costs.

Further sanctions, bans or other economic actions in response to the ongoing conflict in Ukraine or in response to any other global conflict could result in an increase in costs and negatively impact our business, results of operations and financial condition.

Numerous economic factors, including a recession, other economic downturns, inflation and the potential for a decrease in consumer spending, could adversely affect us

Various adverse economic conditions, including a recession, other economic downturns and inflation could decrease consumer discretionary spending and adversely affect our financial performance.

Consumer prices for all items rose 8.2% percent from September 2021 to September 2022, the largest percent change since 1981.

Rising inflation rates have led to increased interest rates.

A recession or other economic downturn could have a material adverse effect on our financial results.

The products and services that are golf and related operations offer are products or services that consumers may view as discretionary rather than necessities.

Our results of operations are sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending.

Other factors, including consumer confidence, employment levels, interest rates, fuel and energy costs, tax rates, and consumer debt levels could reduce consumer spending or change consumer purchasing habits.

Slowdowns in the U.S.

or global economy, or an uncertain economic outlook, could materially adversely affect consumer spending habits and could have a material adverse effect on our business, results of operations and financial condition.

Challenges with respect to labor, including availability and cost, could impact our business and results of operations

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The profitability of our golf and related operations segment depends on our ability to anticipate and react to changes in commodity costs, including food, supplies, fuel, utilities and other operating costs, including labor.

We continuously monitor supply and cost trends of these commodities.

During the nine months ended September 30, 2022, we experienced higher commodity costs compared to the prior year period.

These increases are primarily driven by overall market demand and inflationary pressures.

Volatility in certain commodity prices and fluctuations in labor costs have adversely affected, and in the future, could adversely affect Avalon’s operating results.

We anticipate commodity costs to continue to remain elevated into 2023 due to inflationary pressures.

An increase in commodity costs could have an adverse impact on our profitability.

65 unchanged sentences

A hearing in this matter occurred in February 2022.

On June 30, 2022, the Oil and Gas Commission rendered their decision for the Division in this matter, once again deferring to the Division in their decision.

On September 30, 2022, the Oil and Gas Commission rendered their decision for the Division in this matter, once again deferring to the Division in their decision.

The Company appealed the decision to the Franklin County Ohio Court of Common Pleas on August 9, 2022.

The briefings in this matter are continuing.

Golf memberships and liquor licenses

7 unchanged sentences

The ability to retain current members and attract new members has been an ongoing challenge.

Although Avalon was able to increase the number of members of the Avalon Golf and Country Club, as of June 30, 2022, Avalon has not attained its membership goals.

There can be no assurance as to when such goals will be attained.

Avalon is continually using different marketing strategies to attract new members, such as local television advertising and various membership promotions.

6 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements