What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2022-11-10 · 242 added, 443 removed, 738 unchanged (48% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Net operating revenues:

10 unchanged sentences

Selling, general and administrative expenses

Operating income

Operating loss

Other income (expense):

Interest expense

Gain on debt extinguishment

Other income, net

Income before income taxes

Loss before income taxes

Provision for income taxes

Less net loss attributable to non-controlling interest in subsidiaries

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

Net loss attributable to Avalon Holdings Corporation common shareholders

Loss per share attributable to Avalon Holdings Corporation common shareholders:

Basic net loss per share

Diluted net loss per share

Weighted average shares outstanding - basic

4 unchanged sentences

(in thousands, except per share amounts)          

September 30,

Current Assets:

41 unchanged sentences

(in thousands, except for share data)

For the Three Months Ended September 30, 2022

Non-controlling

Shareholders'

Balance at July 1, 2022

Stock options - compensation costs

Net income (loss)

Balance at September 30, 2022

For the Three Months Ended September 30, 2021

Non-controlling

Shareholders'

Balance at July 1, 2021

Stock options - compensation costs

Investment in subsidiary from accredited investor

Net income (loss)

Balance at September 30, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders ’

Equity (Unaudited)

(in thousands, except for share data)

For the Nine Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

Non-controlling

2 unchanged sentences

Stock options - compensation costs

Investment in subsidiary 

from accredited investor

Net income (loss)

Balance at September 30, 2022

For the Nine Months Ended September 30, 2021

Balance at March 31, 2023

For the Three Months Ended March 31, 2022

Non-controlling

3 unchanged sentences

Investment in subsidiary from accredited investor

Net income (loss)

Balance at September 30, 2021

Balance at March 31, 2022

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Reconciliation of net income to cash provided by operating activities:

Reconciliation of net loss to cash used in operating activities:

Depreciation and amortization expense

2 unchanged sentences

Provision for losses on accounts receivable

Gain from disposal of equipment

Gain on debt extinguishment

Change in operating assets and liabilities:

9 unchanged sentences

Other liabilities and accrued expenses

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Capital expenditures

Proceeds from disposal of equipment

Net cash used in investing activities

1 unchanged sentence

Proceeds from subsidiary private placement offering

Proceeds under New Term Loan facility

Principal payments on term loan facilities

Borrowings under line of credit facility

Payments of debt issuance costs

Principal payments on finance lease obligations

Net cash provided by (used in) financing activities

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

Decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

3 unchanged sentences

Capital expenditures included in accounts payable

Significant non-cash operating and financing activities:

Interest forgiven from Paycheck Protection Program loans

Significant non-cash investing and financing activities:

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

Finance lease obligations incurred

Cash paid during the period for interest

3 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Description of Business

14 unchanged sentences

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

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of September 30, 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 March 31, 2023, 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, 

Reference Rate Reform.

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

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

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

As of March 31, 2023, there were several new accounting pronouncements issued by the FASB.

Each of these pronouncements, as applicable, has been or will be adopted by the Company.

Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

6 unchanged sentences

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

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

September 30,

Cash, cash equivalents and restricted cash consist of the following at March 31, 2023 and December 31, 2022 (in thousands):

Cash and cash equivalents

6 unchanged sentences

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.

Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue as the Company is a pass-through conduit for collecting and remitting sales taxes.

The Company does not incur incremental costs to obtain contracts or costs to fulfill contracts that meet the criteria for capitalization.

12 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 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.

Due to the suspension of the salt water injection wells, there were no operating revenues for the three months ended March 31, 2023 and 2022.

For the three months ended March 31, 2023 and 2022, the net operating revenues related to waste management services represented approximately 69 % and 65 %, respectively, of Avalon’s total consolidated net operating revenues.

For the three months ended March 31, 2023, two customers accounted for 32 % of the waste management services segment’s net operating revenues to external customers and 22 % of the consolidated net operating revenues.

For the three months ended March 31, 2022, two customers accounted for 20 % of the waste management services segment’s net operating revenues to external customers and 13 % of the consolidated net operating revenues.

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

26 unchanged sentences

Due to adverse weather conditions, net operating revenues relating to the golf courses, which are located in northeast Ohio and western Pennsylvania, were minimal during the first three months of 2023 and 2022.

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 the three months ended March 31, 2023 and 2022, the net operating revenues related to the golf and related operations represented approximately 31 % and 35 %, respectively, of Avalon’s total consolidated net operating revenues.

For both the three months ended March 31, 2023 and 2022, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

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

21 unchanged sentences

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

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

The following table presents our net operating revenues disaggregated by revenue source for the three months ended March 31, 2023 and 2022 (in thousands).

Sales and other taxes are excluded from revenues.

Three Months Ended

Nine Months Ended

September 30,

Waste management and brokerage services

14 unchanged sentences

The amounts due are stated at their net realizable value.

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 March 31, 2023 and December 31, 2022, accounts receivable, net, related to our waste management services segment were approximately $ 10.7 million and $ 10.0 million, respectively.

At March 31, 2023, two customers accounted for approximately 37 % of the waste management services segment’s receivables and 29 % of the consolidated receivables.

At December 31, 2022, one customer accounted for approximately 18 % of the waste management services segment’s receivables and 16 % of the consolidated receivables.

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.

Accounts receivable, net, related to our golf and related operations segment were approximately $ 2.7 million and $ 1.1 million at March 31, 2023 and December 31, 2022, respectively.

No one customer of the golf and related operations segment accounted for 10% or more of Avalon’s golf and related operations segment or consolidated net receivables at March 31, 2023 or December 31, 2022.

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 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):

Allowance for credit losses was approximately $ 0.3 million at both March 31, 2023 and December 31, 2022.

The following table presents changes in our allowance for credit losses during the three months ended March 31, 2023 and 2022 (in thousands):

Beginning of Period

1 unchanged sentence

Allowance for credit losses

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Three months ended March 31, 2023

Three months ended March 31, 2022

Contract Assets

2 unchanged sentences

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

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $ 0.9 million at September 30, 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):

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $ 0.7 million at March 31, 2023 and $ 0.6 million at December 31, 2022.

The following table presents changes in our contract assets during the three months ended March 31, 2023 and 2022 (in thousands):

Beginning of Period

2 unchanged sentences

Unbilled membership dues receivable

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Three months ended March 31, 2023

Three months ended March 31, 2022

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 $ 4.6 million at September 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 $ 4.9 million at March 31, 2023 and $ 3.6 million at December 31, 2022, 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 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):

Customer advance deposits were approximately $ 1.1 million at March 31, 2023 and $ 1.0 million at December 31, 2022.

The following table presents changes in our contract liabilities during the three months ended March 31, 2023 and 2022 (in thousands):

Beginning of Period

2 unchanged sentences

Deferred membership dues revenue

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Three months ended March 31, 2023

Three months ended March 31, 2022

Customer advance deposits

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Three months ended March 31, 2023

Three months ended March 31, 2022

Property and Equipment

6 unchanged sentences

in our Condensed Consolidated Statements of Operations.

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

September 30,

Property and equipment at March 31, 2023 and December 31, 2022 consists of the following (in thousands):

Land and land improvements

5 unchanged sentences

Property and equipment, net

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

At March 31, 2023, the Company did not have any significant fixed contractual commitments for construction projects.

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

3 unchanged sentences

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

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

During the first three months of 2023 and 2022, no triggering events were present.

Operating Leases

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

Avalon leases golf carts and associated GPS equipment, furniture and fixtures for The Grand Resort and office copiers under operating leases.

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

The weighted average remaining lease term on operating leases was approximately 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 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 September 30, 2022 and December 31, 2021 consists of the following (in thousands):

September 30,

The weighted average remaining lease term on operating leases was approximately 3.7 years at March 31, 2023.

During the first three months of 2023 and 2022, the Company entered into new operating lease agreements for golf cart GPS equipment.

During the first three months of 2023 and 2022, the Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $ 35,000 and $ 31,000 , respectively.

Leased property and associated obligations under operating leases at March 31, 2023 and December 31, 2022 consists of the following (in thousands):

Operating lease right-of-use assets

2 unchanged sentences

Total obligations under operating leases

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

The weighted average discount rate on operating leases was 5.0 % at both March 31, 2023 and December 31, 2022

Finance Leases

4 unchanged sentences

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

At September 30, 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 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,

At March 31, 2023 there were approximately 30.6 years remaining on the golf course and related facilities finance lease.

In addition, the Company also entered into lease agreements for a vehicle, golf course maintenance and restaurant equipment which were determined to be finance leases.

At March 31, 2023, the vehicle, golf course maintenance and restaurant equipment have remaining lease terms ranging from less than 1 year to 4.6 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.3 years at March 31, 2023.

Leased property and associated obligations under finance leases at March 31, 2023 and December 31, 2022 consists of the following (in thousands):

Leased property under finance leases

4 unchanged sentences

Total obligations under finance leases

The weighted average discount rate on finance leases was 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):

The weighted average discount rate on finance leases was 6.5 % at March 31, 2023 and 5.2 % at December 31, 2022.

For the three months ended March 31, 2023 and 2022, components of lease expense were as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Operating lease cost:

4 unchanged sentences

Total finance lease cost

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

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

Total lease payments

2 unchanged sentences

Long-term portion of obligations under leases

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.

Basic and Diluted Net Loss per Share

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

For both the three months ended March 31, 2023 and 2022, the weighted average number of common shares outstanding was 3,899,431 .

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

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

For the three 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.

For both the three months ended March 31, 2023 and 2022, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Assuming dilution, the weighted average number of common shares outstanding for the three months ended March 31, 2023 and 2022 was 3,915,947 and 3,924,788 , respectively.

Term Loans and Line of Credit Agreements

3 unchanged sentences

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.”

At both March 31, 2023 and December 31, 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.

10 unchanged sentences

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.

Avalon was in compliance with the 2022 Term Loan Agreement covenants at March 31, 2023 and December 31, 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 .

5 unchanged sentences

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

At 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.

At March 31, 2023 and December 31, 2022, approximately $ 2.2 million and $ 1.6 million, respectively, was outstanding under the Line of Credit Agreement.

At March 31, 2023 and December 31, 2022, approximately $ 2.8 million and $ 3.4 million, respectively was available under the Line of Credit Agreement.

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

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

At March 31, 2023, the interest rate on the Line of Credit Agreement was 8.25 %.

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 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”).

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

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

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

Collateral or guarantor support is not required for the loan.

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

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

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

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

Extinguishments of Liabilities .

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

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

Avalon was in compliance with the Line of Credit Agreements covenants at March 31, 2023 and December 31, 2022.

During the three months ended March 31, 2023 and 2022, the weighted average interest rate on outstanding borrowings was 6.10 % and 5.00 %, respectively.

Obligations under the Company’s term loan agreement at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

March 31, 2023

Debt Issuance Costs

7 unchanged sentences

Long-term debt

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.

Obligations under the Company’s Line of Credit agreement at March 31, 2023 and December 31, 2022 were approximately $ 2.2 million and $ 1.6 million, respectively, which matures on July 31, 2024.

For the twelve months ending March 31, future maturities under the Company’s 2022 Term Loan and Line of Credit Agreements are as follows (in thousands):

During the three months ended March 31, 2023 and 2022, net loss attributable to Avalon Holdings Corporation shareholders was $ 1.7 million and $ 1.3 million, respectively.

Avalon recorded a state income tax provision in both the three month periods ended March 31, 2023 and 2022, 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 before taxes was offset by a change in the valuation allowance.

Avalon’s income tax benefit on the loss 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.

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.

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

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

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

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

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

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

Additionally, the Appropriations Act enacts new provisions and extends certain provisions originated within the CARES Act, including an extension of time for repayment of the deferred portion of employees’

payroll tax through December 31, 2021, and a temporary allowance for full deduction of certain business meals.

Avalon has elected not to defer the employees’

portion of payroll tax.

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

Long-Term Incentive Plan

25 unchanged sentences

The grant date fair value of the underlying equity was determined to be equal to Avalon’s publicly traded stock price as of the grant dates times the sum of the Class A and Class B common shares outstanding.

The expected term, or time until the option is exercised, is typically based on historical exercising behavior of previous option holders of a company’s stock. Due to the fact that the Company has had no historical exercising activity, prior to 2018, the simplified method was applied. 

Because of the nature of the vesting described above, the options are separated into five blocks, with each block having its own vesting period and expected term. 

The expected term, or time until the option is exercised, is typically based on historical exercising behavior of previous option holders of a company’s stock.

Due to the fact that the Company has had no historical exercising activity, prior to 2018, the simplified method was applied.

Because of the nature of the vesting described above, the options are separated into five blocks, with each block having its own vesting period and expected term.

For stock option awards, the expected volatility was based on the observed historical volatility of Avalon common stock.

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Treasury securities over a period consistent with the expected term.

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 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.

In March 2023, options to purchase 36,000 shares previously granted under the 2009 Plan were cancelled as the options did not meet the predetermined stock price within the three years following the contractual vesting period.

At March 31, 2023, options for 18,000 shares remain outstanding.

The following table is a summary of the stock option activity during 2023:

Fair Value at

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Options cancelled or forfeited

Outstanding at September 30, 2022

Outstanding at March 31, 2023

Options Vested

Exercisable at September 30, 2022

Exercisable at March 31, 2023

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

1)    Contract Vesting Term:

1) Contract Vesting Term:

The stock options vest ratably over a five year period.

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

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

The table below represents the period and predetermined stock price needed for vesting.

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96 months after Grant Dates

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.

Compensation costs were approximately $ 1,000 for both the three month periods ended March 31, 2023 and 2022.

As of March 31, 2023, there was approximately $ 2,000 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 1.00 years.

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

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

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

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

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

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

Business Segment Information

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

For the three months ended March 31, 2023, two customer accounted for 32 % of the waste management services segment’s net operating revenues to external customers and 22 % of the consolidated net operating revenues.

The accounting policies of the segments are consistent with those described for the consolidated financial statements in the summary of significant accounting policies included in Avalon’s 2022 Annual Report to Shareholders.

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Three Months Ended

Nine Months Ended

September 30,

Net operating revenues from:

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Golf and related operations

Segment income before income taxes

Segment loss before income taxes

Corporate interest expense

Corporate gain on debt extinguishment

Corporate other income, net

General corporate expenses

Income before income taxes

Gain on debt extinguishment:

Waste management services

Golf and related operations

Total gain on debt extinguishment

September 30,

Loss before income taxes

Identifiable assets:

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Elimination of intersegment receivables

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.

In comparing total assets at March 31, 2023 with those at December 31, 2022, the increase in the total assets of the waste management services segment of approximately $ 2.4 million was primarily a result of an increase accounts receivable and intersegment transactions, which are eliminated in consolidation.

The increase in total assets of the golf and related operations segment of $ 2.8 million was primarily due to an increase in accounts receivable, inventory 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 decrease in corporate total assets of approximately $ 0.1 million was primarily due to a decrease in operating cash and cash equivalents, partially offset by an increase in intersegment transactions, which are eliminated in consolidation.

Certain Relationships and Related Transactions

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

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

At March 31, 2023 and December 31, 2022, 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.

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in our Condensed Consolidated Statements of Operations.

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.

During the three months ended March 31, 2023 and 2022, net loss attributable to the noncontrolling interest in AWMS Holdings, LLC was $ 68,000 and $ 62,000 , respectively.

Avalon Med Spa, LLC

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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 September 30, 2022 and December 31, 2021.

Avalon is the majority owner of Avalon Med Spa, LLC owning 50.1 % of the company at both March 31, 2023 and December 31, 2022.

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.

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in our Condensed Consolidated Statements of Operations.

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 .

During the three months ended March 31, 2023 and 2022, net loss attributable to the noncontrolling interest in Avalon Med Spa, LLC was approximately $ 54,000 and $ 76,000 , respectively.

Injection Wells Suspension

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

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

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

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

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

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On March 11, 2015, an appeal hearing was held.

The Chief stated during the hearing that the suspension order is temporary, and he expects that AWMS #2 will be allowed to resume operations once the state’s final policymaking is complete. 

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

The Chief stated during the hearing that the suspension order is temporary, and he expects that AWMS #2 will be allowed to resume operations once the state’s final policymaking is complete.

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

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

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

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

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

Subsequent to the ruling, and in accordance with the Court’s Decision and Order, both Avalon and the Division submitted their proposed restart plans to the Court.

Avalon’s plan sets forth both the initial volumes and pressures and increases in volume and pressure while continuously monitoring seismicity and addressing the concerns of public health and safety.

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

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

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

On February 22, 2017, the Division appealed the Final Decision and Order and filed a Motion to Stay the Court Order.

The Motion to Stay was granted by the Ohio 10 th District Court of Appeals on March 21, 2017.

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

The decision reinstated the previous Ohio Oil and Gas Commission decision in this matter. 

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

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

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

The Oil and Gas Commission scheduled a hearing on this motion for August 13, 2019.

Before the hearing began, and in response to the Division’s motion to dismiss the Company’s motion to vacate, the Commission dismissed the matter. The Company appealed that decision to the Franklin County Court of Common Pleas. In April 2020, the Division’s motion to dismiss and the Company’s opposition were reviewed by the Court. Following the restart orders received on May 24, 2021, and discussed below, the Court dismissed the complaint.

Concurrently with the filing of the appeal with the Franklin County Court of Common Pleas, the Company filed a writ of mandamus in the 10 th District Court of Appeals on August 30, 2019 to compel the chief of the Division to issue restart orders, or alternative orders that would allow the Company to either restart the AWMS #2 well, or appeal said orders to the Oil and Gas Commission in accordance with Ohio Law. On October 6, 2020 and in response to a motion from the Division, the Court dismissed this complaint for writ of mandamus.

Before the hearing began, and in response to the Division’s motion to dismiss the Company’s motion to vacate, the Commission dismissed the matter.

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

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

Following the restart orders received on May 24, 2021, and discussed below, the Court dismissed the complaint.

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

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

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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.

The trial occurred in September and October 2021.

The Company is currently awaiting judgment from the 11 th Appellate District Court.

On December 19, 2022, the 11 th Appellate District Court denied the Company’s writ of mandamus action.

The Court determined that the Company failed to establish a cognizable property interest that would necessitate a just compensation/takings analysis and accordingly denied the Company’s petition for writ of mandamus.

The decision was appealed to the Supreme Court of Ohio on January 30, 2023.

Briefing to the Supreme Court of Ohio is underway.

On May 24, 2021, the Company received Chief’s Orders from the Division vacating the September 3, 2014 suspension orders for AWMS #2 and setting conditions for restart of that well.

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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.

The briefings in this matter are complete and the Company is awaiting a decision.

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.

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Liquidity and Capital Resources

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.

For the three months ended March 31, 2023, 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.

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

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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.

At March 31, 2023 and December 31, 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.

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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

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

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

Collateral or guarantor support is not required for the loan.

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

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

Avalon was in compliance with the 2022 Term Loan Agreement covenants at March 31, 2023 and December 31, 2022.

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.

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.

At March 31, 2023 and December 31, 2022, approximately $2.2 million and $1.6 million, respectively, was outstanding under the Line of Credit Agreement.

At March 31, 2023 and December 31, 2022, approximately $2.8 million and $3.4 million, respectively was available under the Line of Credit Agreement.

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

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

At March 31, 2023, the interest rate on the Line of Credit Agreement was 8.25%.

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

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

Avalon was in compliance with the Line of Credit Agreements covenants at September 30, 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.

Avalon was in compliance with the Line of Credit Agreements covenants at March 31, 2023 and December 31, 2022.

During the three months ended March 31, 2023 and 2022, the weighted average interest rate on outstanding borrowings was 6.10% and 5.00%, respectively.

Squaw Creek Country Club Lease Agreement

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Capital Expenditures

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.

During the three months ended March 31, 2023, Avalon incurred capital expenditures of $1.3 million of which $1.1 million of such expenditures was paid to vendors during the period.

In addition, during 2023, approximately $0.2 million of such expenditures related to golf course maintenance equipment acquired under a new finance lease agreement.

During the three months ended March 31, 2022, Avalon incurred capital expenditures of $1.9 million of which $1.3 million of such expenditures was paid to vendors during the period.

For both the three months ended March 31, 2023 and 2022, expenditures primarily related to the continued renovation of The Grand Resort and the clubhouse at Avalon Field Club at New Castle.

In 2023 and 2022, The Grand Resort was in operation but certain existing hotel rooms were in the process of being renovated.

In addition, in 2022 and 2021, the Avalon Field Club at New Castle was in operation but the club house was in the process of being renovated.

Avalon’s aggregate capital expenditures in 2022 are expected to be in the range of $6.0 million to $6.5 million, funded with cash from our project fund account, existing operating cash and cash generated from operations.

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

In addition, in 2022, the Avalon Field Club at New Castle was in operation but the club house was in the process of being renovated.

During the third quarter of 2022, the club house renovation was substantially completed.

Avalon’s aggregate capital expenditures in 2023 are expected to be in the range of $3.5 million to $4.5 million, funded with cash from our project fund account, proceeds from our line of credit, existing operating cash and cash generated from operations.

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

Working Capital

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.

At March 31, 2023 and December 31, 2022, there was a working capital deficit of approximately $4.3 million and $2.8 million, respectively.

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

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

Accounts receivable increased to $13.4 million at March 31, 2023 compared with $11.1 million at December 31, 2022.

Accounts receivable related to our waste management services segment increased approximately $0.7 million at March 31, 2023 compared with December 31, 2023 as a result of the timing of receipt on the receivables.

Accounts receivable related to the golf and related operations segment increased approximately $1.6 million at March 31, 2023 compared to December 31, 2022 due to the associated timing of annual membership renewals.

Unbilled membership dues receivable was approximately $0.7 million at March 31, 2023 compared to $0.6 million at December 31, 2022.

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 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 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 $1.5 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.

Inventory was approximately $1.7 million at March 31, 2023 compared to $1.5 million at December 31, 2022.

The increase is related to merchandise, food and beverage inventory related to our golf and related operations segment.

Accounts payable was approximately $13.2 million at March 31, 2023 compared to $11.0 million at December 31, 2022.

Approximately $0.6 million of the increase in accounts payable between periods was due to the waste management segment.

Accounts payable related to our waste management segment increased as a result of the associated timing of vendor payments in the ordinary course of business.

Accounts payable related to our golf and related operations increased $1.6 million at March 31, 2023 compared to December 31, 2022, due to the associated timing of vendor payments in the ordinary course of business.

Deferred revenue relating to membership dues was approximately $4.9 million at March 31, 2023 compared to $3.6 million at December 31, 2022.

The increase in deferred revenues was primarily due to the associated timing of annual membership renewals and, to a lesser extent, an increase in the number of members in 2023 and an increase in membership dues rates.

The number of members at March 31, 2023 was 5,073 compared to 4,983 at December 31, 2022.

Accrued payroll and other compensation was approximately $1.4 million at March 31, 2023 compared to $1.0 million at December 31, 2022.

The increase is primarily due to the associated timing of payment of certain earned employee incentives relating to our waste management services segment.

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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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 and a multipurpose recreation center.

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

Performance in the first quarter of 2023 compared with the first quarter of 2022

Overall Performance

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.

Net operating revenues increased to $18.4 million in the first quarter of 2023 compared with $14.3 million in the first quarter of 2022.

Net operating revenues of the waste management services segment were approximately $12.7 million in the first quarter of 2023 compared to $9.3 million in the first quarter of 2022.

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 quarter of 2023 compared to the first quarter of 2022.

Net operating revenues of the golf and related operations segment were approximately $5.7 million in the first quarter of 2023 compared to $5.0 million in the first quarter of 2022.

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 quarter of 2023 compared to the first quarter of 2022.

Total cost of operations related to the waste management services segment increased to $10.4 million in the first quarter of 2023 compared with $7.6 million in the first quarter of 2022.

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 $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.

Total cost of operations related to the golf and related operations segment increased to $5.8 million in the first quarter of 2023 compared to $4.8 million in the first quarter of 2022.

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 and increased cost of food, beverage and merchandise.

Depreciation and amortization expense was approximately $0.9 million in the first quarter of 2023 compared to $0.8 million in the first quarter of 2022.

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.

Consolidated selling, general and administrative expenses were approximately $2.5 million in the first quarter of 2023 compared to $2.3 million in the first quarter of 2022.

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.

Interest expense was approximately $0.5 million in the first quarter of 2023 compared to $0.3 million in the first quarter of 2022.

During the first quarter of 2023, 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 March 31, 2023 and 2022, the weighted average interest rate on outstanding borrowings was 6.10% and 5.00%, respectively.

Net loss attributable to Avalon Holdings Corporation common shareholders was $1.7 million, or $0.43 per share, in the first quarter of 2023 compared with a net loss attributable to Avalon Holdings Corporation common shareholders of $1.3 million, or $0.32 per share, in the first quarter of 2022.

Segment Performance

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Waste Management Services Segment

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 net operating revenues of the waste management services segment increased to $12.7 million in the first quarter of 2023 compared with $9.3 million in the first quarter of 2022.

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 $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 $6.4 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.

The net operating revenues of the waste disposal brokerage and management services business were approximately $11.9 million in the first quarter of 2023 compared to $8.7 million in the first quarter of 2022.

Event work net operating revenues related to multiple projects increased by approximately $2.9 million during first quarter of 2023 when compared to first quarter of 2022.

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 $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.

Event work net operating revenues were approximately $6.0 million in the first quarter of 2023 compared with $3.1 million in the first quarter of 2022.

In addition, continuous work of the waste disposal brokerage business increased approximately $0.3 million between periods as a result of increased work from multiple customers.

Net operating revenues related to continuous work were approximately $5.9 million in the first quarter of 2023 compared with $5.6 million in the first quarter of 2022.

The net operating revenues of the captive landfill management operations were approximately $0.8 million in the first quarter of 2023 compared to $0.6 million in the first quarter of 2022.

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 $12.2 million in the third quarter of 2022 compared with $9.4 million in the third quarter of 2021.

Costs of operations related to the waste management services segment increased to $10.4 million in the first quarter of 2023 compared with $7.6 million in the first quarter of 2022.

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 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.

The overall gross margin percentage of the waste brokerage and management services business was approximately 18% in the first quarter of 2023 compared to 19% in the first quarter of 2022.

The decrease in the overall gross margin percentage was primarily attributable to the lower gross profit event work projects during first quarter of 2023.

Income before income taxes for the waste management services segment were approximately $0.9 million in the first quarter of 2023 compared to $0.7 million in the first quarter of 2022.

Income before income taxes of the waste brokerage and management services business was approximately $0.9 million in the first quarter of 2023 compared to $0.7 million in the first quarter of 2022.

The increased income before income taxes was primarily attributable to the increased net operating revenues and associated gross profit during the first quarter of 2023 compared to the first quarter of 2022.

Income before income taxes of the captive landfill operations were approximately $0.1 million in both the first quarter of 2023 and 2022.

During both the first quarter of 2023 and 2022, 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 appeal and mandamus processes.

Golf and Related Operations Segment

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.

Net operating revenues of the golf and related operations segment were approximately $5.7 million in the first quarter of 2023 compared to $5.0 million in the first quarter of 2022.

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 and a multipurpose recreation center.

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 $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 $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 $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 $0.4 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.

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.

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

Overall Performance

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 $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

Segment performance should be read in conjunction with Note 13 to the Condensed Consolidated Financial Statements.

Waste Management Services Segment

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 $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 $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 $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 $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 to approximately $2.0 million in the first quarter of 2023 compared to $1.7 million in the first quarter of 2022.

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 $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.

Other net operating revenues related to the golf and related operations were approximately $3.7 million in the first quarter of 2023 compared to $3.3 million in the first quarter of 2022.

Membership dues revenue was approximately $1.8 million in the first quarter of 2023 compared to $1.7 million in the first quarter of 2022.

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

Net operating revenues related to room rental was approximately $0.9 million in the first quarter of 2023 compared to $0.7 million in the first quarter of 2022.

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, 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.

Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $0.9 million in the first quarter of 2023 compared to $0.8 million in the first quarter of 2022.

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.

Greens fees and associated cart rentals were approximately $0.1 million in both the first quarter of 2023 and 2022.

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 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.

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

A significant decline in members could adversely impact the financial results of the golf and related operations segment.

Total cost of operations for the golf and related operations segment were $5.8 million in the first quarter of 2023 compared with $4.8 million in the first quarter of 2022.

Cost of food, beverage and merchandise was approximately $1.0 million in the first quarter of 2023 compared to $0.7 million in the first quarter of 2022.

The increase in total food, beverage and merchandise costs between periods is due to both an increase in business operations and higher product costs.

The cost of food, beverage and merchandise sales was approximately 52% of associated revenue in the first quarter of 2023 compared to 45% in the first quarter of 2022.

Golf and related operations operating costs increased to approximately $4.8 million in the first quarter of 2023 compared with $4.1 million in the first quarter of 2022.

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 quarter of 2023 compared to the first quarter of 2022.

The golf and related operations recorded a loss before income taxes of $1.3 million in the first quarter of 2023 compared with a loss before income taxes of $0.8 million in the first quarter of 2022.

The change between periods was primarily a result of higher product and employee related costs in the first quarter of 2023 compared to the first quarter of 2022.

General Corporate Expenses

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

General corporate expenses were $0.9 million in both the first quarter of 2023 and 2022.

Interest Expense

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.

Interest expense was approximately $0.5 million in the first quarter of 2023 compared to $0.3 million in the first quarter of 2022.

During the first quarter of 2023, 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 March 31, 2023 and 2022, the weighted average interest rate on outstanding borrowings was 6.10% and 5.00%, respectively.

Net loss attributable to Avalon Holdings Corporation common shareholders was $1.7 million in the first quarter of 2023 compared to a net loss attributable to Avalon Holdings Corporation common shareholders of $1.3 million in the first quarter of 2022.

Avalon recorded a state income tax provision in both the first quarter of 2023 and 2022, which was related entirely to the waste management and brokerage operations.

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

Avalon’s income tax benefit on the loss 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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Trends and Uncertainties

Financial impact of COVID-19 pandemic

In March 2020, both federal and state governmental bodies took unprecedented measures to try and control the spread of the COVID-19 coronavirus including the issuance of temporary stay at home orders, the temporary closing of non-essential businesses and in-house dining and restrictions on gatherings and events.

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

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

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

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

Paycheck Protection Program Loan